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Market outlook: Technical pullback imminent but Nifty may hit a bump at 200-DMA

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Global markets continued to affect Indian stocks on the last day of the week. Though Nifty came off from their day’s lows, it still closed the day with a net loss of 116.70 points or 1.15 per cent on Friday.

As we enter the fresh week, the caution will prevail, as we have a short week with Wednesday being the last trading day and also the expiry day of the current derivative series.

Given the persistent weakness in global markets, we may see a modestly negative opening once again. However, that being said, the Friday’s low of 9,951 will be critical support to watch for. It may happen that we open lower, but do not breach 9,950, and improve later in the day.

The levels of 10,075 and 10,110 will act as immediate resistance area for the market. Supports came in at 9,950 and 9,920 zones.

The Relative Strength Index (RSI) on the daily chart is 32.1077, and it shows bullish divergence against the price. While Nifty formed a fresh 14-period low, the RSI did not. The daily MACD stays bearish trading below its signal line. A falling window occurred on the candles. This is a gap-down and implies a continuation of downtrend.

But with the Nifty forming a white body, there are fewer chances that it may have a lesser impact in the present context and scenario on the charts. However, everything will need a confirmation on the following candle.

Pattern analysis shows that the Nifty showed a minor pullback and resisted to the 200- DMA midweek. Thus forming a formidable resistance area, the Nifty continued to decline at the closing levels, while continuing to resist to the 200-DMA.

While keeping in mind that the global markets will trade more days than Indian stocks, caution is certainly to prevail on our market.

This cautionary approach may not see our market pulling back significantly or attempt to reverse the trend in this week itself.

The current downtrend may persist, but the market is now overdue to attempt a technical pullback. However, the levels of 200-DMA will continue to pose immediate resistance.

Now lows may not easily be formed or sustained. Some minor technical pullback can be expected any time.

STOCKS TO WATCH: Resilient technical setup is observed in stocks like CG Power, OIL, Marico, ITC, ICC, Idea Cellular, DishTV, BHEL, NHPC, HCL Technologies, Coal India, TVS Motors and Asian Paints.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

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