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Market outlook: Keep exposures in check; 10,760-10,785 key


In a note for Wednesdays session, it was mentioned that volatility (India VIX) was likely to remain at one of the lowest values in recent times. Todays trade, however, saw volatility making a comeback, as the Nifty oscillated in a 60-point before settling with a nominal loss. The Index lost 21.30 points or 0.20 per cent.

The market consolidated for the session, but at the same time, remained quite volatile. We expect this volatility to spill over into Thursdays trade as well.

Though the start to the trade may be uneventful on either side, we will see the market consolidating with the levels of 10,785 acting as immediate resistance area. On Thursday, the levels of 10,760 and 10,785 will offer resistance to any upmoves, while supports will come in at 10,680 and 10,650 zones.

The Relative Strength Index (RSI) on the daily chart stands at 67.7129. It remains neutral against the price showing no divergence. The daily MACD stays bullish trading above its signal line. On the candles, a black candle emerged. This has occurred near the upper Bollinger band, and this typically stalls an ongoing upmove.

Pattern analysis reveals that after breaking out from a rectangle formation, the Nifty is consolidating at higher levels. Though some retracement from current levels should not come as a surprise, it has continued to consolidate in a capped range at present.

Overall, as we approach trade on Thursday, if we see such consolidation continuing, it should be healthy for the market. Some shorts have started to get build up once again as we are see Nifty premiums getting reduced by nearly 25 points.

We expect the levels of 10,785 acting as resistance for the immediate short term, and expect the market to oscillate with limited downsides.

We recommend avoiding shorts and utilising downsides, if any, to make select purchases. Volatility too is likely to remain ingrained in the market.

Overall exposures should be kept moderate while maintaining a cautious view on the market.

STOCKS TO WATCH: Short positions were seen being built in Hindustan Zinc, ICICI Bank, Idea, Ashok Leyland, Marico, Power Grid, NCC, Tata Power, CG Power, Engineers India, IGL, TVS Motors and Coal India.

(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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