Mr. Mustafa Nadeem, CEO, Epic Research
Nifty has formed a piercing line pattern on the weekly chart indicating support at lower zone and closing almost within previous week's range pairing its half losses. This is a reversal pattern on the weekly chart which was amid all the factors that can contribute to price be it Domestic, International, Macro event or so.
The week started off with a gap down and negative sentiments following the global cues with western markets losing almost 3 - 6% in a major sell-off as volatility expanded. The OPEC meeting which was on the edge of being indecisive impacted the crude and concerns on global slowdown was triggered with a fall in crude prices. The markets also reacted and were shadowed by the recent arrest of Global CFO of a Mobile manufacturing giant.
That being said, The sudden resignation from RBI governor on Monday left markets and investors in the dark with Nifty seeing a gap down next market. Though a gap down to lower levels triggered some lower levels buying which supported the sentiments and amid the results of state elections market recovered. A rally was seen with market inching back to previous week's range and forming a piercing line pattern.
A piercing pattern is a reversal pattern that indicates the lower range of pattern as an important support which is a buying range for bulls and a pullback to that zone may see some buying.
The better than expected data of Industrial production at 8.1% VS 4.5% and drop in the inflation rate to 2.33% VS 3.38% boosted the sentiment neglecting any rate hike fears. Increase in manufacturing production and a drop in WPI fuel inflation also helped improve the sentiments.
All being said and done prices closed comfortably in a bullish zone of 10700 - 10900. This is an important resistance placed at 10900 as it's a pivot high and needed to break to see an extension of trend else we may see some consolidation going forward within the range of 10700 - 10900.
Going forward, with the absence of any data that or event that is major in nature on the domestic front, cues will be seen from western markets which are at crucial supports. Crude oil direction and USDINR will be critical to forming a bias in the market and seen leading the sentiments.
We suggest buying only if Nifty is able to close above 10920 for a directional target of 11150 else the range may continue to be 10700 - 10900.