Domestic equity markets along with global markets reacted much positively to the Federal Reserve’s decision to keep the rate unchanged as it opened with a gap up and ended the day with decent gains. The Fed’s outcome was very much on expected lines. Though the markets are likely to show upward bias, some possibilities of consolidation at higher levels cannot be ruled out. Though we may see continuation of Thursday’s up move, some amount of vigilance and caution is advised at higher levels as it will be some time before we see any runaway rise in the markets.
For Friday, the levels of 8,890 and 8,968 will act as immediate resistance levels while the supports will come in at 8,810 and 8,730 levels. The RSI—Relative Strength Index on the daily charts is 60.4174 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD still remains bearish while it trades below its signal line. On the candles, some contradictory reading as occurred. Thursday’s session has seen a rising window occurring where a top of the previous shadow is below bottom of the current shadow and this typically implies continuation of bullish trend.
On the other hand, Thursday’s session has also seen a Spinning Top occurring. Such session have a typically small real body and has a potential to temporarily halt up moves. However, both of these formations require confirmation on the following day.
On the derivative front, the Nifty September futures have shed over 1.94 lakh shares or 0.60 per cent in Open Interest and this indicates minor short covering in the markets. Coming to pattern analysis, the markets have attempted to move up again after consolidating since last four sessions. Any normal up move will see the markets approaching its previous immediate high of 8968 levels. However, the overall structure on the charts do not rule out the possibility of the markets consolidating before it gives any runaway rise. All and all, though the undercurrent continue to remain bullish some amount of consolidation before markets show strong up move and attempt to scale new highs cannot be ruled out. In any case that is likely to remain range bound. It is advised to continue to make selective stock specific purchases. IT and banks may consolidate from here and select midcaps will continue to outperform.
Though vigilant profit protection is advised at higher levels, cautious optimism is advised for today.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)