The Nifty50 continued with its losing streak on Wednesday, as the benchmark index closed 47.20 points or 0.46 per cent lower.
What seemed to be a classical recovery in the first half of the session turned highly disappointing, as the index lost over 125 points from the high point of the day.
Volatility ruled the roost as the market modestly breached the 50-DMA support at the close, but stayed within its filters.
Caution weighed heavy ahead of Gujarat poll surveys and US Federal Reserve interest rate decision, wherein a rise of 25 basis points is discounted for.
Going into trade on Thursday, we might see the market attempting to stabilise in efforts to find some base again.
The market has ended just a notch below its 50-DMA, but has remained within its filter, and has held the support zone of 10,180-10,200.
We expect a modestly positive opening on Thursday and the levels of 10,180 and 10,110 will hold out as extremely important supports.
The Relative Strength Index (RSI) on the daily chart is 46.9237, and it stays neutral, showing no divergence against the price. The daily MACD continues to remain bearish, while trading below its signal line. No significant formations were seen on the candles.
Pattern analysis shows that the market continues to drift downwards and remain in the falling channel. This falling channel is the intermediate trend created after the market marked the lower top of 10,410.
All in all, Nifty on Thursday will face little tricky situation. It would be of paramount importance for the markets not to significantly breach the 10,180-10,200 support zones. If this happens, we will see some more weakness persisting in the near term.
However, there is a silver lining in the form of much lower-than-average volumes in the previous two declines that the market saw. Also, the shorts that exist in the system can lend support in case of extended weakness.
Overall, we recommend staying away from taking any major exposure in the market, and adopt wait-and-watch approach with a cautious view for the day.
STOCKS TO WATCH: Large number of shorts were seen being built in ICICI Bank, Dish TV, TV18 Broadcast, Federal Bank, Bank Of India, State Bank Of India, Canara Bank and Hexaware.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
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