Resistance for Nifty seen at 8,770/ 8,820: Milan Vaishnav

By: | Updated: September 29, 2016 8:44 AM

Thursday is the expiry day of the current derivative series and we will see the session remaining heavily dominated with rollovers.

Sensex, nifty, bse, nseThursday is the expiry day of the current derivative series and we will see the session remaining heavily dominated with rollovers. (Photo: Reuters)

Domestic equity markets ended the day with modest gains on Wednesday after struggling in the initial trade. The levels of 50-DMA has continued to act as support at close levels and on Thursday, this keeps our analysis on the similar lines. The markets do not seem completely out of the woods as of now and the levels of 50-DMA and 8,680 will remain critical levels to watch out for. Any drift below this will bring short term weakness in the markets. Today is the expiry day of the current derivative series and we will see the session remaining heavily dominated with rollovers. The levels of 8,770 and 8,820 will act as immediate resistance levels for markets. The supports will come in at 8,700 and 8,620 levels. The RSI—Relative Strength Index on the Daily Chart is 50.1787 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish while trading below its signal line.

On the derivative front, the NIFTY September futures shed over 33.24 lakh shares or 16.14 per cent in open interest while October futures added over 40.34 lakh shares or 29.33 per cent in open interest. If we evaluate the overall short term pattern on the charts, the markets have formed a lower top at 8,900 levels after marking 8,968 as its immediate top. The markets have taken supports around 8680-8700 range twice and this has formed a small Descending Triangle on the Daily Chart. This is potentially bearish in the short term. To fail this pattern, we will need to see the markets moving above 8870-8900 levels in order to resist from getting weaker.

The support zone of 8,680 also coincides with 50-DMA which is 8,687 and therefore these levels become critically important levels to watch out for. Any breach below these levels will bring in short term weakness on the Daily Charts. All and all, even if we see short term up move, the markets will not be completely out of the woods until it moves past 8870-8900 levels. Until this happens we will see the trading sessions oscillating in a capped range with a negative bias. On Thursday, we might see some consolidation on the bank stocks while it deals with expectations of a rate cut in coming days. Apart from this, stock specific and sectoral outperformance will continue.

(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)

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