After a lackluster first half and a volatile second half, the domestic equity markets ended with modest gains on Tuesday. On Wednesday, we can expect a quiet start to the markets and our analysis remain on similar lines that of yesterday. RBI cut its key rate – Repo Rate – by 25 basis points to 6.25 per cent and this should have positive effect, though temporary on the markets. The 6 member MPC unanimously voted for a rate decrease as they found inflation well within the tolerance levels.
However, speaking on technical terms, the markets are still not out of the woods and the levels of 8800-8850 will remain extremely critical levels to watch out for.
For Wednesday, the NIFTY is likely to face resistance at 8785 and 8820 levels. The supports will come in at 8730 and 8690 levels.
The RSI—Relative Strength Index on the Daily Chart is 52.8526 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD is bearish as it trades below its signal line. However, in coming days, if no major downsides are seen, we may see a likely positive crossover on the Daily Charts. On the Candles, a Doji occurred. A long lower shadow is also seen and looking at the place of occurrence, it can potentially halt the current pullback.
Careful study of the pattern analysis makes it quite evident that after a strong downward breach from the Descending Triangle formation; the markets have pullback entire of its losses and have moved inside the triangle formation once again. In given case, the level of 8690 will be critical support level to watch out for. In event of any corrective movement, any breach below 8690 will induce fresh amount of weakness in the markets. On the upper side, the zones of 8800-8850 will pose stiff resistance. Overall, choppiness and volatility are likely to remain ingrained and we will see some capped movements in the session. The markets have a inherent weak technical bias for the immediate short term until it is trading below 8800-8850 levels. To be out of the current pattern and ready itself for a fresh up move, the NIFTY needs to move past these levels. Until then, while making stock specific purchases, all up moves should be used to vigilantly protect profits at higher levels.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)