Equity markets took a breather on Wednesday and closed marginally lower note while continuing to exhibit internal strength. Wednesday’s session saw the markets consolidating on perfectly expected lines. Today as well, we are likely to see some consolidation happening and we will see the session remaining range bound with a positive bias. The levels of 8,968.70 will act as immediate very short term resistance levels for the markets.
For Thursday, the levels of 8,970 and 9,025 can act as technical resistance levels while we will see supports coming in at 8,885 and 8,850 levels. The RSI—Relative Strength Index on the Daily Chart is 69.9503 and it has just moved below its “oversold” territory from a topping formation. It remains neutral showing no failure swings or any bullish or bearish divergence. The Daily MACD remains bullish while trading above its signal line.
On the derivative front, NIFTY September futures 1.08 lakh shares or 0.32 per cent in Open Interest. The F&O figures clearly demonstrate continuing fund flow and the liquidity fuelling selective purchases. While having a look at pattern analysis, the markets retraced after intraday highs of 8968.70 yesterday and this level will continue to act as resistance for the immediate short term. It is expected that the markets will continue to consolidate before it gathers itself for a fresh further up move. In event of further up move, the markets are likely to track the upper rising trend line drawn from February lows and this will comfortable aid the markets testing the 9000-and beyond levels. However, before this some consolidation cannot be ruled out and this will remain in form of intermittent profit taking bouts within a range bound movement.
While we see some consolidation happening, we will continue to witness sector churn within the markets. Quality midcaps and Nifty laggards are likely to outperform and we will continue to see selective purchases happening. Select midcaps, media, pharma and IT shares are likely to outperform the benchmark.
(The author is Milan Vaishnav, CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)