While trading perfectly on analysed lines, the domestic equity markets traded in a narrow range and consolidated for the second day in a row while keeping its head successfully above the critical 8700-mark as it ended the day on Thursday with minor gains. On Friday as well, while once again keeping the analysis on similar lines, we would like to add some positive bias to that as well. Today, we can fairly expect the markets to remain stable and trade positive and some chance to resume its up move. However, the levels of 8,700 would continue to remain an extremely critical level to watch out for.
On Friday, the levels of 8,765 and 8,795 will act as immediate resistance levels while the supports will come in at 8,700 and 8,665 levels. The RSI—Relative Strength Index on the Daily Chart is 52.3049 and it remains neutral while showing no bullish or bearish divergence or any failure swing. The Daily MACD stays negative while trading below its signal line. On the candles, two potentially bullish / reversal causing formations have been observed.
Thursday’s candle was a ‘Doji’ (wherein the real body gaps above or below the previous candle) and this candle also has a long lower shadow. Now, if this happens near a support or if it appears after a decline, it can mark a potentially bullish reversal. However, both of these require confirmation on the following day.
On the derivative front, the NIFTY September futures has shed over 5.77 lakh shares or 1.77 per cent in open interest. Since shows some more amount of short covering from lower levels in the markets. Having a close look at the pattern analysis, it is much visible that the after seeing 100 per cent retracement after breakout out from the 8,700-8,730 levels on the upside, these levels have successfully acted as support for the markets on its way down. The reading remains clear that so long as the markets remain and trade above 8,700-levels, no major downsides will be witnessed. However, any breach below 8700-mark will see some pain in the immediate short term.
All and all, the reading on the technical charts, the F&O data and the lead indicators clearly suggest a positive bias for the markets. There are increased chances that Friday we may see some attempt to move on the higher side. Though bulk of the global outlook will remain range bound due to pending US Interest Rates outcome on September 21, it is widely expected that the rates would remain unchanged and emerging markets in general and India in particular will stand to favourable react to this. Overall, while refraining from shorts, selective buying can be done with any range bound movement. Cautiously positive outlook advised for today.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)