NIFTY Index Chart Analysis
Some more consolidation likely before major breakout or breakdown
Indian stock markets had attempted a gradual recovery post end of earnings season and macroeconomic data, but retreated after North Korea fired a missile over Japan, escalating tensions between Pyongyang and Washington. Investors shifted their investments to safer havens like gold and silver that surged sharply by 550 and 900 points, respectively. Moreover, we are approaching August F&O series expiry which may result in further volatility on the downside. On the Nifty50 front, it was more of a stockspecific movement that dragged or pulled markets on a daily basis. It started off with Infosys falling nearly 10% on a single day with the resignation of its CEO Vishal Sikka.
Technically, considering the daily time frame, after a volatile session at the start of the week with Nifty resisting at 61.8% retracement level of the sharp downward move staring 10088 on Aug 7, Nifty opened on a negative note posting an open-high 9886-9887 levels. Nifty tumbled sharply up to the upward sloping multipoint trendline level of 9783-9780. The fall was supported by justifiable volumes and 14-period RSI negative crossover. Nifty has been making lower tops, but higher bottoms, creating a triangular pattern. Going forward, 9780 followed by 9740, are the immediate supports for the Nifty. Nifty has just closed near its 50-day EMA support and, hence, in case it recovers from the current levels, we hold 9840-9870 as the immediate resistances. The level of 9925 on a closing basis would act as a provisional trend reversal.
On a weekly basis, after a prior sharp weekly fall from Aug 7 to Aug 11, Nifty is witnessing consolidation for three consecutive weeks. The consolidation is supported by falling volumes and the 14-period RSI trailing in the range of 61-64. Thereby, considering medium term, we hold 9685 as the major support followed by 9445, which will act as a trend reversal. On the upside, Nifty needs to break out of the 9965 level in the first place, followed by 10100-10150 to continue with the uptrend in the markets.
The corporate earnings recovery after the GST roll-out in second half of the current financial year may bring in some optimism in the markets which would be reflected in September quarter earnings. Till then, favourable monsoon will be the key support for the markets.
However, if weak global cues outpace, Nifty may remain range-bound to the downside in the coming days.