MARKET TREND FOR MONDAY, OCTOBER 24, 2016
Though the equity markets on Friday recovered off its lows
to end the day with minor losses, it continued to resist at 8690-8710 levels
for the entire session. Today, on Monday as well, we will continue to see the
NIFTY resist to these levels and the behavior vis-à-vis the 50-DMA of 8709 will
be critical to watch out for. However, we may continue to see some resistance
at these levels, some consolidation will happen but will happen with a positive
bias as lead indicators are showing possible resumption in uptrend in coming
days.
For today, the levels of 8710 and 8745 will act as immediate
resistance levels. The supports will come in at 8650 and 8605 levels.
The RSI—Relative Strength Index on the Daily Chart is
50.3060 and it remains neutral as it shows no bullish or bearish divergence or
any failure swings. The Daily MACD stays bearish as it trades below its signal
line. However, if the NIFTY continues to consolidate, we may see this indicator
reporting a positive crossover. A minor engulfing candle on the Candles
indicates a potential positive bias. However, this needs confirmation on the
following day.
On the derivative front, the NIFTY October futures have shed
over 3.90 lakh shares or 2.10% in Open Interest. This shows some possible short
covering that happened in the second half of the session on Friday. The key
would be to see if this gets replaced with fresh buying in coming days.
Coming to pattern analysis, the Markets continues now to
remain in a falling channel drawn from 8968 levels. In between this formation,
it is resisting to its 50-DMA which is 8709 and this may act as immediate
resistance at Close levels. However, for the NIFTY to resume its up move, it
needs to move past the levels of 8740-50. Until this happens, we will continue
to see the NIFTY oscillating in a trading range.
As it has happened in previous week, we will continue to see
out-performance from select stocks and individual stock specific performance
may continue. However, given the indications from the lead indicators, we
advice to refrain from any major short positions and use downsides to make
fresh purchases. MidCaps, Energy, and Auto stocks will continue to outperform.
Overall, cautiously positive outlook is advised for the day.
Milan Vaishnav, CMT
Technical Analyst
(Research Analyst, SEBI Reg.
No. INH000003341)
Member:
Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Association of Technical Market Analysts, (ATMA), INDIA
http://milan-vaishnav.blogspot.com
+91-98250-16331
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