Globally market turned positive after a report that the Deutsche Bank is near a settlement with the justice department. US market closed higher followed by Asian market which was in green, helped domestic market to open higher. Nikkei Manufacturing PMI data which was higher than expected bring additional momentum in the market and continue buying interest since then lifted the market higher.
Finally, Nifty ended the day at 8738.10, up by 126.95 point from the last Friday’s close. Throughout the trading session market breadth was in positive and no such attempt from the bears was visible and market continued to recover most of the big fall we have witnessed last Thursday. However, key resistance is at 8,800, as such one should wait for a close above this level before come into conclusion that market resumes its long-term uptrend after the correction. Nifty in its daily time series chart has formed a relatively large range candlestick pattern with little shadow in both side. The positive close indicating dominance of the bulls from the beginning of the trading session till the end. If we consider the recent fall last week this is significant recovery and we can expect market to give strong directional movement going forward.
Momentum indicators after the recent rangebound movement starting to fall and indicating divergence. However, we want price action to confirm the direction first before commenting this is the sign of weakness. The chances of a bounce back can’t be ruled out as the overall market trend is sideways and it is trading at the lower end of the channel. From medium term perspective the key resistance is at 8,800 level. We expect this level as an important one and is likely to offer strong supply. Breaking of the level market will find the momentum which is lacking couple of days and will then set for moving above the recent swing high at 9,000 level. Investors are advised to initiate long on a break above 8800 with a stop below 8680.
(The author is founder & CEO, CapitalVia Global Research)