The session on Friday saw the corrective action getting extended, as the market continued with its modest slide. The benchmark Index Nifty50 continued to fall and ended the day with a loss of 61.40 points or 0.57 per cent.
The session remained relatively less volatile and therefore did not see India VIX rising too much. The session remained confined to a narrow range all throughout the day.
As we approach a fresh week, stable global environment may see Indian market opening on a relatively stable and modestly positive mode. We may also see some technical pullback, but speaking on broad terms, we will continue to see consolidation persisting in the market with the previous weeks high acting as major resistance.
Mondays trade is likely to see the levels of 10,650 and 10,695 acting as resistance. Supports are likely to come in at 10,575 and 10,540.
The Relative Strength Index (RSI) on the daily chart is 57.8654, and it has marked a fresh 14-period low, which is bearish. RSI has marked a fresh 14-period low while Nifty has not done so. This also marks a bearish divergence against the price.
Daily MACD still continues to trade above its signal line. No significant formations were seen on the candles.
Pattern analysis shows that after breaking out from the rectangle formation and testing immediate highs of 10,785, the Nifty has been giving a throwback. It continues to remain in this formation until it forms a higher bottom and attempts to move higher again.
Overall, though a positive and stable start is expected on Monday, we will continue to see consolidation persisting at higher levels. The markets still continue to remain vulnerable to profit taking bouts at higher levels unless the levels of 10,785 are breached on the upside.
The VIX continues to remain low, and this keeps room for volatility to increase in the near-term. Though there are no signs as yet that point towards any major downsides.
While continuing to avoid shorts, any corrective moves from higher levels should be used to make fresh purchases. Highly stock-specific approach with cautious view on the market is advised for the day.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])