Domestic equity markets on Thursday will open after two days of holidays and will have some catch-up to do with weak global markets. Speaking purely on technical terms, this may cause a modestly negative opening to Nifty and once again, the level of 8,690 will remain critical level to watch for.
For Thursday, the levels of 8,725 and 8,760 will act as immediate resistance levels and the supports will come in at 8,690 and 8,620 levels. The RSI—Relative Strength Index on the Daily Chart is 48.7340 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD continues to remain bearish as it trades below its signal line.
On the derivative front, the NIFTY October futures have shed over 1.76 lakh shares or 0.82 per cent in Open Interest. This signifies modest continuation of offloading / unwinding of long positions. Coming to pattern analysis, the NIFTY has continued to remain in a Descending Triangle formation and it is now moving towards its apex. The more a security price moves towards its apex during such formation, greater are the chances of any such formation failing. In the given case, the 50-DMA which is 8,708 and the neckline levels of 8690 will be the critical levels to watch for and any breach below these levels will see more weakness in the Markets. Overall, if NIFTY is able to trade above 8,710, i.e. above the 50-DMA and the neckline levels, it will continue to remain in the current formation. However, any drip below 8,690 will induce more weakness in the markets. The domestic markets may witness some alignment to global markets and this may see some negative bias and choppiness remaining ingrained. While remaining very modest on the overall exposure, cautious approach is advised for the day.
(The author is CMT, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services)