Domestic equity markets had a volatile and choppy session on Wednesday while it ended on absolutely flat note after coming off nearly 50-odd points from the high point of the day. On Thursday, we will see the markets trading purely on technical parameters and some amount of fatigue remains evident on the daily charts. Though BoJ move on not reducing interest rates and making some adjustments in the stimulus remained a non-event, consolidation is likely to continue if we speak purely on technical terms.
For today, the levels of 8,830 and 8,865 will remain immediate resistance levels. The levels of 8,730 and 8,680 will remain immediate support for the markets.
The RSI—Relative Strength Index on the daily chart is 54.0819 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 derivative front, the Nifty September futures have added over 1.31 lakh shars or 0.41 per cent in Open Interest.
Looking at pattern analysis makes one thing quite evident that the markets have consolidated in a narrow range over last four sessions. It is also worth noting that after making an immediate top of 8,968 on the daily charts and after showing 100 per cent throwback to 8,700-8,730 zones from where the markets broke out, the level of 8,847 has become a lower top for the markets.
In other words, it would be critically important for the markets to move past the level of 8850 to remain in sideways consolidation. Any failure to do so and any drift towards 8,700 levels will see some short term negative bias. Overall, Federal Reserve not rising rates has been largely discounted for.
Though sectors like IT, metals and select mid caps will continue to outperform, cautious view on the markets is advised for Thursday.
(The author is CMT, Consultant Technical Analyst, Gemstone Equity Research & Advisory Services)