Domestic equity markets on Friday traded within a capped range and ended with minor losses but overall, the Nifty continues to precariously hang around its critical support levels of 8,690. On Monday, we may see a modestly stable opening but speaking purely on technical terms, the levels of 8,690 remains critical to watch out for. In any case, this would be a truncated one with just 3 working days with Tuesday and Wednesday being holidays on account of Dusshera and Mohharam respectively.
On Monday, the levels of 8,710 and 8,775 will act as immediate resistance levels for the markets. The supports come in at 8,690 and 8,620 levels. The RSI—Relative Strength Index on the Daily Charts is 47.8404 and it remains neutral showing no bullish or bearish divergence or any failure swings. The Daily MACD trades bearish below its signal line.
On the weekly charts, the weekly RSI is 60.4125 and this too remains neutral without showing any bullish or bearish divergences. The weekly MACD has reported a negative crossover and it now bearish as it trades below its signal line.
On the derivative front, the Nifty October futures have 6.72 lakh shares or 3.04 per cent in Open Interest. While having a look at pattern analysis, the Nifty evidently continues to struggle while taking support at the neckline levels of descending triangle formation which is 8,690. The 50-DMA of Nifty stands at 8706 and it has closed a notch below this but trades within its filter. On the weekly charts, the lead indicators have began to show signs of weariness and some possibility of downside correction cannot be ruled out if the Nifty breaches the levels of 8,690 comprehensively.
On the upper side, the 8800-8850 zones continue to pose formidable resistance to the markets. Overall, we might see shallow activities in the markets this being a very short week and caution with a negative bias will continue to prevail. Some sector rotation will be seen and we will see outperformance from select midcaps. Overall, to avoid any further weakness, the Nifty will have to defend 8,690 levels and in event of any up moves, selling pressure from higher levels cannot be ruled out.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)