For Tuesday, the levels of 8,760 and 8,825 will act as immediate resistance levels while the supports will come in at 8,700 and 8,660 levels.
Domestic equity markets had a disappointing session as it posted worse-than-expected performance on Monday and ended the day with a deep cut. On Tuesday, we once again expect a soft start to the markets. Though some attempts to stabilise at current levels will be seen, two readings stand established on Daily Charts. First, though there is no structural breach on the daily charts as yet, the levels of 8,968 have been confirmed as an immediate top for the markets; and second, the levels of 8900 have been marked as a “lower top” on the Daily Charts. The levels of 50-DMA which is 8680 will be crucial level to watch for.
For Tuesday, the levels of 8,760 and 8,825 will act as immediate resistance levels while the supports will come in at 8,700 and 8,660 levels. The RSI—Relative Strength Index on the Daily Chart is 48.2820 and it has reached its lowest value in last 14-days which is bearish. Also, RSI has set a fresh 14-period low whereas Nifty has not yet and this is Bearish Divergence. The Daily MACD stands bearish as it trades below its signal line. A Falling Window (a gap) on the daily charts makes it even more likely that we may see some more weakness persisting for some time.
On the derivative front, the Nifty September futures have shed over 63.49 lakh shares or 20.26 per cent in Open Interest. The October futures added over 56.22 lakh shares or 178.55 per cent as rollovers were visible in the session.
Pattern analysis clearly confirms the level of 8,968 as the immediate top for the Markets. After nearly 100 per cent retracement from the breakout levels of 8,700-8,730, retracement again to these levels from 8,900 markets this as the lower top on the daily charts. Due to this development, once again the attention shifts to the critical support area of 8,700-8,730 and the subsequent support levels of 50-DMA which is 8680. Any breach below the 50-DMA mark will bring in more weakness for the intermediate term.
Overall, markets continues to trade above all of its moving averages and therefore there is no structural breach on the charts as yet. However, as mentioned, the levels of 50-DMA will be critical support levels at close to watch out for. Some more weakness may creep in if these levels are breached. The rollovers will continue to keep the session choppy and volatile. We will continue to see out-performance from IT, select Pharma and MidCapt stocks.
(The author is CMT, Consultant Technical Analyst, Gemstone Equity Research & Advisory Services)