The domestic equity market remained subdued for the most part of the session on Friday, but the second half saw the benchmark Nifty50 come off its lows and finally end the day on a flat note, losing 2.20 points or 0.02 per cent.
The discomfort was evident at lower levels, as the pullback was on account of short covering from the low point of the day. Purely from a technical perspective, since the market ended the previous session coming off its lows, we can expect the Monday’s session to start on a modestly positive note.
With no other headwind, the Nifty is most likely to continue with its upward move in initial trade, but broadly speaking, consolidation is likely to continue with a positive bias. The 8,950 level will continue to remain a major pattern area resistance at close. For Monday, the 8,950 and 8,990 levels will act as immediate resistance for the Nifty. Supports will come in at 8,835 and 8,770 levels.
On the daily chart, the Relative Strength Index, or RSI, stood at 64.3820 and it showed no failure swings. It also does not show any divergence from the price. The daily MACD is bearish, as it continues to trade below its signal line, but the trajectory is flattened.
The candles do not show any major formation on the daily charts. Nifty March futures have shed over 5.85 lakh shares, or 2.65 per cent in Open Interest. The fact that the Nifty50 saw sharp recovery in the second half of Friday’s session and along with a decline in open interest showed that the pullback was because of short covering from lower levels.
Pattern analysis confirms the 8,930-8,950 zone as a Double Top resistance area on the daily charts. For any meaningful upward move to occur, the Nifty50 will have to move past and close above this area. Until this happens, we will continue to see broadbased consolidation.
The Bollinger Bands are 37.71 per cent narrower than normal, but this does not singularly suggest anything significant. All and all, the Nifty has continued to display buoyant undercurrents. The fact that there was short covering from lower levels on Friday showed the discomfort of the market participants at lower levels.
However, this needs to be replaced with fresh longs in the coming days. Overall, while avoiding shorts completely, we recommend select stock picking at lower levels. A positively cautious outlook is advised for today.
STOCKS TO WATCH:
1. HERO MOTOCORP: The stock is attempting to break out of a bullish consolidation formation. With relative strength improving and lead indicators showing an upward momentum, any movement above Rs 3,290-3,295 will take the stock higher. Any call on this above the prescribed level would be positional, and not intraday.
2. HUL : This stock has been trading in a narrow range on the weekly charts. On the daily charts, the relative strength is seen improving and lead indicators are neutral with a positive bias. The stock can move higher if it moves above Rs 880. Any call on the stock above the prescribed level will be positional, and not intraday.