Domestic equity markets on Monday traded exactly on analysed lines. They continued to exhibit positive bias but also resisted to the 8710-8740 levels while it ended the day with minor gains. On Tuesday, we keep our analysis on similar lines as the Nifty is likely to continue to resist to 8,740 levels which is a important pattern resistance as well. Markets also have a news developments at Tata Group as well to which it might react with a knee-jerk reaction. However, in the long run, these developments will be viewed as a proactive actions from a sensitive Board in the general interest of the stakeholders at large.
For Tuesday, the levels of 8,740 and 8,775 will act as immediate resistance levels. The supports will come in at 8,650 and 8,625 levels. The RSI—Relative Strength Index on the Daily Chart is 51.4669 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD has reported a bullish crossover and it now trades above the signal line.
On the derivative front, some rollovers were witnessed as Nifty October futures shed over 16.30 lakh shares or 8.94 per cent in Open Interest while November futures added over 19.15 lakh shares or 55.36 per cent in Open Interest resulting in to net addition in the OI. While we have look at the pattern analysis, the NIFTY continued to resist to the upper trend line of the falling channel that the NIFTY has formed from the previous highs of 8968 level. Having said this, it has also been resisting at close levels to the 50-DMA level which is 8709. With the Nifty exhibiting positive bias, any move beyond 8740-50 zones will see the Nifty making hard attempts to resume its up move. The reading of lead indicators and F&O data support this view as well.
Overall, though will might still witness some intraday volatility and choppiness and even minor declines, the inherent trend of the NIFTY continues to remain strong and it is likely to show resilience to any possible downside dips. Though some intermittent selling bouts cannot be ruled out, markets will be seen making efforts to resume its up move and show good amount of resilience to downsides. While all dips should be continued to be utilised to make fresh purchases, cautious optimism is advised for the day.
(The author is Consultant Technical Analyst, Gemstone Equity Research & Advisory Services)