Headline index Nifty opened lower, and stayed in the negative territory throughout the day. After opening with a cut, the index continued to stay negative but did not take any directional bias. The opening low point formed in the
first hour of the session was defended throughout the day. While not taking any directional trend, the index stood in a 100-point range and oscillated within that area. The headline index finally ended the day with a net loss of 86.10 points or 0.49 per cent.
It is largely expected that the broad trading range formed between 17,400-17,950 may hold. The market may try and find stability this week and arrest its corrective move. The F&O data support this technical setup as well. The decline on Friday have come with a rise in Open Interest; Nifty October series futures have added over 3.66 lakh shares or 3.14 per cent in net Open Interest. This means there is creation of large short positions which may get covered. In this case, the low point of 17,450 becomes a major support area for the market in the near term. If broken, it can result in
India VIX came off by 6.48 per cent to 17.2100. Monday’s session may have a positive start to the day; the levels of 17,610 and 17,665 will act as probable resistance points while support will come in at 17,480 and 17,450 levels.
The Relative Strength Index (RSI) on the daily chart stood at 58.45; it has made a new 14-period low which is bearish. It also continued to show a mild bearish divergence against price. The daily MACD was bearish and below its Signal Line.
A falling window emerged on the candles; this essentially forms because of a gap-down and usually resolves with the continuation of the downtrend. However, it is extremely important to note that no formation on the candles should be read in isolation. The present falling window has occurred near a good pattern support; this may not necessarily result in continuation of a downtrend.
The analysis for Monday continues to remain on similar lines so far as technical setup of the market goes. Nifty may still continue remaining in a broad range after a possible technical pullback. On the other hand, some stock-specific and sector specific performances may be seen. We recommend avoiding shorts and making purchases on a highly selective basis while vigilantly protecting profits at higher levels. Sectors like select banks, autos, PSE, etc, may continue to improve their relative strength as well over the coming days.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at firstname.lastname@example.org)