NIFTY Index Chart Anal­y­sis

Some more con­sol­i­da­tion likely be­fore ma­jor break­out or break­down

Dalal Street Investment Journal - - TECHNICALS | EQUITY -

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.

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