Given some contradictory technical signals on the daily and weekly charts, we had mentioned in our Friday’s edition that some corrective intermittent selling bouts cannot be ruled out. Keeping in line with this analysis, the equity markets on Friday saw some corrective selling pressure while it ended with loss of 0.96 per cent. On Monday, we will see such corrective activity continuing and the session is likely to remain in a given range with some corrective bias. We can expect to see the markets opening on a negative note and some amount of consolidation is likely to continue. The intraday trajectory that the markets form will be critical to watch out for. For today, the levels of 8,890 and 8,940 will act as immediate resistance levels and the supports will come in at 8,830 and 8,775 levels.
The RSI—Relative Strength Index on the daily chart is 62.5151 and it has once again moved below from a topping formation which is bearish. Beyond this, it remains neutral without showing any bullish or bearish divergence or any failure swings. The daily MACD stays bullish as it continues to trade above its signal line. On the weekly charts, the weekly RSI is 70.5763 and it has reached its highest value in last 14-periods which is bullish. Though it does not show any bullish or bearish divergence, it remains in “overbought” territory on weekly basis. Weekly MACD remains bullish trading above its signal line. On the weekly charts, a Shooting Star on the candles occurred which has capacity to form a potential top for the markets in the immediate short term. On the derivative front, the NIFTY September futures have shed over 9.12 lakh shares or 2.66 per cent in open interest clearly indicating offloading of long positions. Pattern analysis of the markets clearly point towards some correction continuing in the markets. On the daily charts, though we saw some corrective activities on the Friday, the weekly chart the lead indicators are overbought and the candles show potential formation of a top for the immediate short term. All these indicate that the levels of 8,968 have now become an
Pattern analysis of the markets clearly point towards some correction continuing in the markets. On the daily charts, though we saw some corrective activities on Friday, the weekly chart the lead indicators are overbought and the candles show potential formation of a top for the immediate short term. All these indicate that the levels of 8,968 have now become an immediate top for the markets and any fresh up move shall occur only after this level is breached on the upside.
All and all, though we may see negative opening and some technical pullback as well later in the day, the overall state of the markets will remain that of consolidation with the levels of 8775 and 8730 acting as very crucial supports. IT pack will continue to see some accumulation on the lower side and some sectoral outperformance will continue as well. Overall, cautious outlook is advised for the day.
(The author is Milan Vaishnav, CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)