Trade setup: Niftys weak opening good time to pick quality stocks
Bearish undertone persisted on Dalal Street, as the NSE benchmark Nifty opened lower on Friday and remained in the falling channel throughout the session. The index ended 86.30 points or 0.81 per cent lower.
The nervousness was evident, as the political drama in Karnataka shifted to proving the majority on the Assembly floor. What happened in the southern state over the past 10 days can also be viewed as a prelude to what can be expected from the general elections in 2019.
Life sprouting out of almost nonexistent Opposition can instil political uncertainty in the country. This was first seen during Gujarat Assembly elections and now became more evident during the Karnataka polls.
As we step into Mondays trade, the market is likely to see a knee-jerk reaction to the BJPs resignation even before the floor test. There are high chances that the Nifty might see a weak opening. However, that being said, it is also likely that post weaker opening, the Nifty might spend rest of the session trying to improve the show. The 100-DMA levels will be very crucial to watch out for as a major support on a closing basis.
The levels of 10,630 and 10,665 will act as resistance, while supports may come in at 10,165 and 10,540 zones.
The Relative Strength Index (RSI) on the daily chart is 47.3261. It has marked a fresh 14-period low, which is bearish. RSI does not show any divergence against the price. The daily MACD stays bearish while trading below its signal line. No significant formations were seen on the candles.
Overall, Monday is likely to turn out to be a volatile session for the market. We will continue to see selective buying at any given levels in the sectors that are outperforming the general market or in the stocks, which have posted good results.
In an event of any possible downside, the 100-DMA levels will be crucial to watch out for. Though overall exposures should be kept at modest levels, lower levels can be utilised to make good quality purchases.
With political dust nearly settled, market may now attempt to find its bottom in the days to come.
STOCKS TO WATCH: Relatively resilient technical setup was observed in stocks such as Tata Global Beverages, Manappuram Finance, Gujarat Narmada, Cadila Health, Ujjivan, Indiabulls Real Estate, Karnataka Bank, Tech Mahindra, TV Today and Linde India.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)