NEW DELHI: In Fridays trade, the Nifty50 held on to its important supports and saw a smart recovery from the lows of the day to end with gains. In our previous note, we had talked about some likely respite from the weakness that the market was experiencing, and projected a possible pullback. Nifty respected the pattern support at the 50-DMA and after remaining rangebound in the first half of the session, it posted a smart rally. The index ended the day gaining 92.55 points or 0.87 per cent.
Purely on technical terms, since the market has ended at the high point of the day, it should continue with its upward move at least in the initial hours of Mondays trade. However, we expect a shaky start to trade on Monday, as investors would be reacting to exit poll outcome and try to build in the election results next day. The election outcome is going to be a volatile affair to handle, as the results will be scrutinised keeping the 2019 general elections in view.
In the event of a shaky start, the 50-DMA which is now at 10,567 followed by 10,510 is expected to lend support to Nifty. Resistance, on the higher side, is expected to come in at 10,740 and 10,770 levels.
The Relative Strength Index or RSI on the daily chart stands at 51.2055. It remains neutral and shows no divergence against the price. The daily MACD is bullish and trades above its signal line. A white body occurred on the candles. Apart from this, no significant formations were observed.
Pattern analysis shows the Nifty has halted at its short-term 20-DMA and going ahead, it has the 200-DMA to deal with, which stands at 10,750.
All in all volatility will remain ingrained throughout Mondays session. There are a significant amount of shorts in the system. Fridays trade saw some short covering as well as addition of fresh longs. This means any downside jerks will also see buying. We, however, recommend guarding profits vigilantly at higher levels until the 200-DMA is breached on the upside. On the lower side, investors should avoid shorts, but can continue defensive purchases on a selective basis. A cautious outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])