In absence of any strong global market, trend domestic equity market remained clueless about its direction and traded in a narrow range throughout the day. Before the Federal Reserve policy meeting investor are on a wait and watch mode as no significant commitment was seen in the market. Despite couple of attempt to move higher market failed to move above the key resistance at 8,850 and finally ended the day at 8,808, up by 28.55 points from Friday’s close.
Overall, it is expected that the big movement in the market will come after the breakout of the tight range (8,730-8,850) as it has witnessed in the last couple of days. It is likely to happen in a day or two after the Fed decision on interest rate will clear. Nifty in its daily time series chart has formed a spinning top candlestick pattern. If we consider the trading activity of last couple of days most of the trading session market ended with the indecision type of candlestick as it was today. This indicates market is waiting for a trigger and before the next move it is consolidating. We expect a breakout from the range of 8730-8850 will bring the momentum in the direction of the breakout.
Momentum indicators after the recent rangebound movement starting to fall and indicating divergence. However, we want price action to confirm the direction first before commenting this as a sign of weakness. From long term perspective the trend remained positive and we expect short term trend after the consolidation is likely to follow the trend of long term.
From medium term perspective the key support is at 8700-8730 level. We don’t expect this level to breach in medium term. On the upside supply is coming at 8850, breaking of the level market will find the momentum which is lacking couple of days. This could then set the market sentiment to boost and a trigger for moving above the recent swing high at 9000 level. Investor is advised to initiate long on a break above 8850 with a stop below 8700.
(The author is founder & chief executive officer CapitalVia Global Research)