Volatility in stocks continued to cool down, as India Volatility Index, INDIA VIX, declined 7.60 per cent to 42.59.
The domestic stock market saw a gap-up start to Friday’s session and extended the technical pullback, helping the headline index to end with decent gains. However, after opening on a stronger-than-expected note, the market gave up much of the gains before rebounding in the second half to recover some of the lost gains. That helped Nifty end on a strong note, piling up 273 points, or 3.05 per cent.
Volatility in stocks continued to cool down, as India Volatility Index, INDIA VIX, declined 7.60 per cent to 42.59.
The market is likely to see a tepid start to Monday’s session. The 9,300 and 9,345 levels are expected to act as strong overhead resistance, while supports will come in at 9,165 and 9,890 levels. Any downside moves are likely to make the trading range wider than usual.
The Relative Strength Index (RSI) on the daily chart stood at 50.34; it remains neutral and does not show any divergence against price. The daily MACD remains bullish as it trades above the signal line. The candles have seen the emergence of a Hanging Man pattern. If this pattern appears after some bounce, it may potentially halt the preceding uptrend.
This would require the confirmation on the next trading bar.
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During Friday’s session, Nifty developed a Rising Wedge pattern, which is not a desirable formation in the current scenario. This is a potentially bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows. Typically, a Rising Wedge pattern emerges from bear market rallies. Unlike Symmetrical Triangles, which have no bullish or bearish bias, a Rising Wedge definitely slopes up and can have a bearish bias.
In the current technical structure, even if the technical pullback continues, it would be wise to stay away from chasing these up-moves. One should continue to protect profits on either side and refrain from taking any heavy directional calls on the upside. A cautious approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
