The markets went past the crucial resistance level of 16,000 and also went on to move past 16,200 levels meaningfully. Throughout the session, the markets kept marking incremental highs — at no point in time did it show any inclination to correct. The market breadth remained strong and the benchmark Nifty50 went on to close on a strong note gaining 456.75 points (+2.89%).
The US markets started initially weak but rebounded towards the end and closed flat. This may aid in a stable opening to the domestic market. The coming week will see monthly derivatives expiry — the sessions from now on will stay influenced by the expiry-centric moves.
With the Nifty moving well above 16,000 levels, the support levels have risen. It would be important for the index to defend 16,000 levels to confirm a base and continue with the extended up move. The action will continue to stay high stock-specific in nature going ahead from here.
Monday is likely to see a stable start to the day. The 16,300 and 16,430 levels will act as immediate resistance points. The supports will come in at 16,180 and 16,105 levels.
The Relative Strength Index (RSI) on the daily chart is 44.36. RSI is neutral and does not show any divergence against the price. However, it is seen breaking out from a small pattern formation after making a higher high which is bullish. The MACD is still bearish and below the signal line; however, the narrowing Histogram hints at a likely positive crossover over the coming days.
A rising window emerged on the candle. This is a result of a gap on the upside. Such formations usually resolve in the direction of the trend. Since such a formation has occurred near a strong pattern support area, there are higher chances of this resulting in a continuation of the pullback.
Overall, if no global weakness is inflicted on the domestic markets, there are greater possibilities of an up move getting extended.
However, that being said, there are also equal chances that the action in the markets remains highly stock specific in nature.
It is recommended that exposures must be focused more on relatively stronger pockets like Consumption, FMCG, PSE stocks, etc, and profits must be protected at higher levels.
A cautiously positive approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at email@example.com)