The domestic market had a disappointing end to the truncated week as Thursdays session ended with losses. After a modest start to trade, Nifty50 spent the first half of the session in a capped range, as it traded with modest gains. It was the second half that saw Nifty lose ground. Though some caution towards the end was expected given the long weekend ahead, but the weaker seen was more than expected. Nifty ended the session near its lowest point, losing 73.30 points, or 0.69 per cent.
Going into a new week, Mondays session will be important, and it is likely to decide market trajectory for the coming few days. We expect a soft start to the session, but at the same time, Niftys behaviour vis-à-vis the 10,510 level will be crucial. If the Index breaches this level, the market will once again get inside the falling channel that it has formed over the past couple of weeks.
The 10,605 and 10,640 levels are likely to act as immediate resistance for the market, while supports should come in at 10,480 and 10,430.
The Relative Strength Index or RSI on the daily chart stood at 48.0080 and it marked a fresh 14-period low, which is a bearish signal. The RSI has also showed a bearish divergence against price. However, the daily MACD remains bullish, but it has seen narrowing of its trajectory.
A pattern analysis on the charts showed the Nifty has managed to move out of the falling channel that it had formed over past couple of weeks. After moving out of this channel, the upward move got stalled at the 200-DMA, which stands at 10745. Nifty not only saw some retracement, but now sits on the verge of getting back into the falling channel once again.
It will be necessary for Nifty to pull back again to avoid getting into the falling channel once again. Nifty has to scale the 10,550 level and go higher to remain in consolidation and avoid further weakness. Any move below 10,510 will make the market vulnerable to more weakness. We suggest investors to protect profits at every rise. Overall exposure should be kept at modest levels, and aggressive positions on either side should be avoided.
A cautious view 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])