Global markets mostly settled flat on Monday after the US employment data that came lower-than-expectation. Investor viewed the data as a strong evidence which can triggered the US central bank to consider raising interest rates this year. Although domestic equity markets opened with slight gap up but failed to gain momentum as follow up buying was missing into the market and investor use the opening gap to exit from the existing position. Finally, Nifty closed at 8708 mark, up 11.20 points against the Friday’s close.
Although most of the trading session market breadth was in positive but bulls failed to build up the strength on it as no such attempt from the bulls was visible and market continued to hover in a tight range. However key support is at 8,700, as such one should wait for a close below this level before come into conclusion that market has entered into a corrective phase.
Nifty in its daily time series chart has formed a Doji candle stick pattern with very narrow range when compare to recent trading activity last week. The narrow range indicating lack of momentum in the market, probably because of the trading holiday before which investor was not ready to build large position. A breakout of the range between 8700-8800, we can expect market to give strong directional movement going forward.
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. Momentum indicators after the recent range bound 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.
From medium term perspective the key resistance is at 8,800 level. We expect this level as important one and is likely to offer strong supply. Breaking of the level, market will find the momentum which is lacking couple of days. This if happen market is likely to set for moving higher and most likely to move above the recent swing high at 9,000 level. Investor is advised to initiate long on a break above 8800 with a stop below 8700.
(The author is founder and CEO at CapitalVia Global Research)