Israel-Iran escalating tension to trigger correction in equities?Market momentum likely to fade, time to protect profits
Over the previous week, the markets were expected to inch higher; therefore Market Prediction is very difficult, however, at the same time, while it was expected that incremental highs may be formed, it was also expected that a runaway move would not happen. Over the past four trading sessions, the markets traded precisely on these analyzed lines. The Nifty formed a fresh lifetime high of 22775, but at the same time, it came off from those highs as well. The trading range also got narrower as the Nifty oscillated in a 271-point range.
Volatility increased slightly; India Vix rose marginally by 1.72% to 11.53. The headline Index Nifty closed flat with a negligible weekly gain of 5.70 points (-0.03%).
The previous week was a truncated one as Thursday was a trading holiday on account of Eid-ul-Fitr. The coming week is a truncated one as well with Wednesday being a holiday on account of Ram Navmi. Due to this Banknifty Options has its shortest expiry as they would expire as early as Tuesday. The level of 22775 creates a new intermediate top for the markets; over the coming days, no runaway upmove is expected so long as the Nifty stays below this point. At the same time, the nearest support for the index exists much below the current levels at 20-week MA which is placed at 21827. By and large, the markets are likely to stay in a broad trading range.
The markets may see a soft start to the week on Monday. The levels of 22650 and 22775 are likely to act as potential resistance points. The supports come in at 22400 and 22280 levels.
The weekly RSI is at 69.87; it has crossed under 70 from the overbought zone. When subjected to pattern analysis, RSI continues to show negative divergence against the price. It has also formed a new 14-period low which is bearish. The weekly MACD is bearish and stays below its signal line.
The pattern analysis shows that the Index has continued resisting the upward-rising trendline on the weekly charts. The upward-rising nature of the trendline is allowing the Nifty to form incremental highs; however, it is also providing strong resistance to the index as it tries to move higher. As of now, the Index has been resisting this pattern resistance every week, and this time it faced selling pressure as well. A bearish divergence on the RSI continues to exist; the nearest support for the Index may be found at the 20-week MA which is placed at 21827.