Domestic equity markets traded more or less on expected lines as it managed to keep its head above the critical 8700-mark for the most part of the day before ending with modest gains. On Thursday, the session is likely to be crucial once again and therefore, the analysis for today would remain on similar lines. The levels of 8700-8730 would be crucial to watch out for and it would be critically important for the markets to trade above 8700-mark to avoid any weakness from setting in.
The levels of 8745 and 8790 will act as immediate resistance levels for the markets. The supports would come in at 8700 and 8665. The RSI—Relative Strength Index on the daily chart is 51.1954 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD continue to remain bearish as it trades blow its signal line.
On the derivative front, the NIFTY September futures have shed over 1.82 lakh shares or 0.56 per cent in Open Interest indicating minor short covering from lower levels. The pattern analysis on the Daily Chart point towards some stability returning to the markets. After achieving 100% retracement / throwback from the breakout levels of 8700-8728 zone, the markets have been attempting to find immediate support at these levels. Further, the lead indicators too rest at pattern support and so do the markets. The F&O data shows minor short covering from lower levels point discomfort of market participants below 8700 levels. The F&O data, coupled with technical indicator suggest possibility of markets taking support at the critical 8700-mark. In any case, the markets will have to see themselves trading above these critical levels to avoid any more weakness from setting in.
IT Sector relatively underperformed on Wednesday but continued to see some accumulation at lower levels. This will continue and we might see it picking up in coming days. Apart from this, selective stocks from basket of NIFTY JR, Banks and select quality MidCaps will continue to outperform today as well. There is no structural breach on the charts as the Markets continue to trade above all of its DMAs. Overall, cautious optimism is advised for the day.
(The author is Milan Vaishnav, CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)