Weakness continued to persist in the domestic equity market for most of the past week. On Friday, the Nifty opened deep in the red and drifted further to end the day with deep cuts despite some modest recovery from the low point o f the day. The Nifty50 ended the day lower by 149 points, or 1.43 per cent.
From Thursdays intraday high, Nifty lost over 400 points in just two sessions by Fridays close and, thereby, it failed the confirm the base that it had attempted for form.
Going into Mondays trade, it would be important for Nifty to not only defend the 10,180-10,250 zone, but also move past the 10,400 mark to defend the support that it has formed over the past few sessions.
The markets behaviour vis-à-vis these levels will not only be important for Mondays session, but also for subsequent sessions.
On Monday, the 10,350 and 10,435 levels are likely to act as immediate resistance for Nifty, while supports should come in at 10,250 and 10,180 levels.
The RSI on the daily chart stood at 34.3387 and it remained neutral showing no divergence against the price. The daily MACD remains bearish as it traded below its signal line. A falling window has emerged on the candles. This is essentially a gap down, but in the present context, it may not spell much damage as it has occurred near the support zone.
Mondays opening and market trajectory from there on would be crucial. The 10,180 and 10,250 levels will be extremely critical to watch out for in the event of any weakness. The Nifty will have to keep its head above these levels to avoid further weakness from creeping in. It failed to confirm this base around the current supports and for it to do that, it is necessary that it crawls back above 10,400 and sustains there.
We recommend a cautious view on the market, but at the same time, advise traders to refrain from aggressive short positions as long as the Nifty50 defends the 10,180 and 10,200 levels.
STOCKS TO WATCH: Resilient behaviour is expected from stocks like Pidilite Industries, ICICI Lombard, UPL, DLF, Mahindra Lifespace, Voltas, Trent, Hindustan Zinc, Gujarat Pipavav, Essel Propack, Whirlpool Industries, Page Industries and Linde India.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])