Friday’s session remained extremely volatile as the markets saw an exceptionally strong start but at one point came off nearly 90-odd points from the high point of the day to end the day with modest gains. On Monday, we can expect a soft start to the session and we might see some more consolidation and volatility staying in the equity markets and the level of 8,968 will continue to act as immediate sacrosanct resistance levels in coming days.
On Monday, the level of 8840 and 8895 will act as immediate resistance levels and the level of 8750 and 8710 will act as immediate supports. The RSI—Relative Strength Index on the daily chart is 54.8875 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The daily MACD stays bearish trading below its signal line. On the candles, a long upper shadow occurred. Such formation on candles has potential to halt any up move and may cause the markets to consolidate and resist up moves. On the weekly charts, the weekly RSI is 66.4487 and it has just crossed below from the topping formation which is bearish.
Though it does not show any bullish or bearish divergence or any failure swing. The weekly MACD stays bullish as it trades above its signal line. On the weekly candles, a falling window occurred. This, just like the candle on the daily charts, has a potential to cause the markets to consolidate.
On the derivative front, the NIFTY September futures have minor increase as it added just 80,925 shares or 0.25 per cent in open interest. While having a look at pattern analysis, the markets have attempted a pullback after seeing 100 per cent retracement / throwback from 8968 levels after achieving a breakout from 8700-8730 range. These levels, so far have acted as support while the markets corrected while making 8968 as its immediate top. This level will continue to act as immediate resistance in coming days. It would be critically important to see the markets trading above 8700-8730 range. If the levels are breached, it can bring some more weakness in the immediate short term.
All and all, we are likely to see the markets remaining in corrective mood some range bound trade with some good amount of volatility cannot be ruled out. We will continue to see out performance from select stocks and all dips are likely to get utilised in making selective purchases. However, any runaway rise in the markets is not expected.
(The author is CMT, Consultant Technical Analyst, Gemstone Equity Research & Advisory Services)