Indian equity market had a turbulent start to the New Year as the benchmark Nifty50 remained range bound throughout the day, but saw a sharp decline in the last hour of the trade. The Index ended the day losing 95.15 points or 0.90 per cent.
Though there is no technical breakdown on the charts, the Monday's session remain technically important and it has certainly pushed the Nifty into some more time under consolidation.
On Tuesday, we see the market making a quiet opening. We may see some lower volumes as well as the participation in the market will remain affected due New Year holidays.
The levels of 10,465 and 10,510 will play out as important resistance levels to watch out for on Tuesday. Supports come in lower at 10,380 and 10,345.
The Relative Strength Index (RSI) on the daily chart is 55.2808 and it remains neutral showing no divergence against the price. The daily MACD continues to stay bullish remaining in continuing buy mode.
An engulfing bearish candle has emerged. It remains significant as it has occurred at the resistance zone of 10,490-10,535 and therefore it reinforces the credibility of this resistance area. The pattern analysis reveals the importance of the 10,490-10,535 support zones.
The market has once again failed to confirm the attempted breakout twice from these levels. This zone will continue to act as immediate short term resistance for the market. Failing to clear the 10,490-10,535 zones for the second time has shown the credibility of this resistance area. Failure to clear the 10,490-10,535 zones has made some more consolidation imminent in the market.
There is no structural breach on the charts, but these levels will continue to resist until we see a comprehensive breakout above this resistance area. Going into trade on Tuesday, selection of stocks will hold the key. We recommend avoiding shorts and trimming exposures with any potential upmove and protecting profits.
Due to New Year holiday season, the volumes will remain affected and this may also infuse some lack of depth and volatility in the market. Cautious outlook is advised for the day.
STOCKS TO WATCH: Very high open interest is seen in counters like JP Associates, IDFC Bank, Suzlon, Adani Power, Sail, RCom, ITC, Tata Power and Federal Bank. Longs were seen added in Reliance Power, Bank Of Baroda, HCC, Power Grid, Karnataka Bank, CG Power and BHEL.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)
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