MARKET OUTLOOK FOR WEDNESDAY,JUNE 06, 2018

MARKET OUTLOOK FOR WEDNESDAY,JUNE 06, 2018

The benchmark Index NIFTY50 slipped for the third day in a row as it ended the day losing 35.35 points or 0.33%. Though this loss is certainly a modest one, the kind of volatility that the session on Tuesday witnessed certainly creates some reason to get cautious in coming days. The session saw continued addition of shorts in the system; however, the last 45-minutes of the trade saw sharp short covering coming in.

The short covering that was seen in the last hour of the trade is likely to spill over on Wednesday as well. We might see some continued up move in the initial trade. However, two things remain distinctly clear. One, there won’t be any runaway up move despite shorts existing in the system; and second, the 50-DMA and 100-DMA are expected to lend important support to the Markets in event of any downsides.

Wednesday is likely to see the levels of 10630 and 10675 acting as immediate resistance area. Supports come in at 10550  and 10535. These levels represent the 100-DMA and 50-DMA of the Markets.

The Relative Strength Index – RSI on the Daily Chart stands neutral showing no divergence against the price. Daily MACD stays bearish while trading below its signal line. On the Candles, a candle with a long lower shadow emerged. In the present context, it remains significant as it has emerged near the support zone of 100-DMA and 50-DMA which remain in very close vicinity of each other.

Pattern analysis suggests that NIFTY tested the support zone wherein the two DMAs, 100 and 50, converge. They remain in close vicinity of each other and NIFTY taking support in this area triggers a mild possibility of a pullback.

In the second half tomorrow, we will have RBI Monetary Policy review to which Markets are likely to react to. Markets are seen discounting the possibilities of a 25bps rate hike. But apart from infusing some volatility in the session, this may remain a non-event. Given the amount of shorts in the system, we may see mild pullback continuing but with this the NIFTY still continue to remain vulnerable to selling at higher levels. Overall, a slightly wide ranged market with some volatility is what is expected on Wednesday. We recommend remaining very light on overall exposure while maintaining a cautious view on the Markets.

Milan Vaishnav, CMT, MSTA
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)

Member: 
CMT Association (Formerly known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK 
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