Domestic equity markets showed good amount of resilience near the resistance levels of 8,690-8,710 zones as it resisted to these levels throughout the day on Thursday while it ended the day with modest gains. On Friday, we will continue to see the Nifty trading with resilience with somewhat positive bias and the levels of 8,690-8,710 will remain important to watch out for. There are chances that the Nifty will attempt to resume its up move if it manages to move past 8,750 levels.
This chances of this happening remain relatively high given the pattern of the lead indicators. On Friday, the levels of 8,710 and 8,755 will act as immediate resistance levels. The supports come in at 8,655 and 8,625 levels. The RSI—Relative Strength Index on the Daily Chart is 50.7563 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD remains bearish as it trades below its signal line. However, it is likely that it reports a positive crossover if the markets do not weaken and if it consolidates in coming days.
On the derivative front, the Nifty October futures have added over 6.45 lakh shares or 3.59 per cent in Open Interest. This throw a significant input which suggests that unwinding has stopped and so has short covering and fresh longs are seen being built in the system.
Coming to pattern analysis, it still remains evident that the Nifty now remains in the falling channel drawn from 8,968 levels. Though it continues to remain in this channel, it faces resistance at 8709, which is the 50-DMA level and then at 8755 which is the falling trend line pattern resistance for the Nifty. If the Nifty manages to move past the 8,755 level in coming days, we will witness fresh resumption in the up move. However, until that happens, range bound oscillation of the Nifty will continue with volatility remaining ingrained in it.
All and all, though the 50-DMA levels might resist at close levels, the lead indicators and the F&O data show the bias shifting to positive. Even if the Nifty consolidates, it seems that the downside may be range bound and we might see the Nifty attempting resumption of up move if it manages to move past 8,750-8,760 zones. Until this happens, though profits be vigilantly protected at higher levels, very selective purchases too should be made keeping in view the imminent chances of stock specific outperformance.
(The author is consultant technical analyst at Gemstone Equity Research & Advisory Services)