Markets

Market outlook: 200-DMA at 10,772 now crucial for Nifty; stay cautious

Rollovers and expiry of December derivative series saw the market trading on a tricky turf, oscillating within a limited range on Thursday, before ending the day with modest gains. Despite a strong opening, Nifty came off its highs. However, its positive opening in the morning was above the pattern resistance of the falling trend line, and also the 200-DMA.

Thursdays upward move halted exactly at the 200-DMA level at 10,772. The index ended the day with a gain of 49.95 points or 0.47 per cent. The 200-DMA level continues to be crucial for Nifty. An analysis of the intraday move shows Nifty came off its highs, but extended its upward move on a closing basis, while halting at the 200-DMA. We expect a soft opening on Friday with chances that the market might extend its upward move. However, it will important for Nifty to trade above the 200-DMA level, and any breach below that will trigger volatile rangebound moves.

The 10,810 and 10,875 are likely to pose resistance to Nifty on the upside, while supports will come in at 10,710 and 10,680.

The Relative Strength Index or RSI on the daily chart stood at 51.9379 and it remained neutral showing no divergence against price. The daily MACD has turned bearish and trades below the signal line. A rising window occurred on the candles. Usually, it implies continuation of the upward move, but under the present circumstance, a confirmation is required on the next trading day.

Pattern analysis of the charts revealed the minor gap-up opening that the market saw on Thursday took the index above the pattern resistance of the falling trend line.

However, the upward move got halted at the 200-DMA mark at 10,772. Overall, in last two sessions that are left of 2018, Nifty is not expected to make any meaningful directional moves. We expect the market to trade in a capped range. However, the price action around the 200-DMA level will be important to watch as any breach below this will invite some short-term weakness in the already troubled market. We recommend maintaining modest exposures while avoiding any major aggressive bets on either side. A cautious approach 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 milan.vaishnav@equityresearch.asia)

Original Article

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