Caution continued to weigh heavy on the domestic equity markets as the Nifty remained under pressure and range bound on Tuesday while it ended the day with modest losses. On Wednesday as well, we continue to keep our analysis on similar lines. While the trade will see some reactions from the changes expected from the BoJ front, caution will prevail ahead of Federal Reserve which will decide on interest rate hike. Over 90 per cent of the participants polled do not expect a hike. However, the session is likely to remain range bound and choppy.
For Wednesday, the levels of 8840 and 8895 will remain immediate resistance levels while supports will come in at 8730 and 8680 levels. The RSI—Relative Strength Index on the Daily Chart is 53.9872 and it remains neutral showing no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish trading below its signal line. An Engulfing Bearish Pattern has occurred on the Daily Charts. Markets may consolidate for some more time. However, this needs confirmation.
On the derivative front, the Nifty September futures have shed over 1.23 lakh shares or 0.38 per cent in open interest. This shows minor offloading / unwinding of long positions in the markets. Pattern analysis clearly depicts unsettled conviction of the participants on the daily charts. Even after receiving 100 per cent throwback from the highs of 8,968, the markets have been indecisive while pulling back and during this process, the levels of 8,730-8,690 zone will continue to act as major pattern support. So, as long as the markets trade above these levels, it will just consolidate. Any breach below this will bring in some weakness for the immediate short term.
Though some caution is clearly visible on the Charts, the global Markets have been trading around its medium term pattern support. With the fact that no rate hike is expected, lot of such developments seem discounted for in the current levels and we might see the up move resuming in coming days.
However, as of now, with caution very clearly visible on the Daily Charts, we reiterate our positive but cautious view on the Markets. Though sectoral and individual stock outperformance will continue choppiness cannot be ruled out.
(The author is CMT, consultant technical analyst, Gemstone Equity Research & Advisory Services)