State elections will certainly provide directional view to market volatility : Epic Research

Mr. Mustafa Nadeem, CEO, Epic Research

Nifty forms a bearish Dark Cloud cover on weekly chart holding the fate of bulls at the swing high placed at 10900. Global markets sell-off that is seen across the major indices has daunted clouds over domestic indices with Nifty giving away almost half of its previous week gains.

Amid a number of global events placed with FOMC, OPEC and the Arrest of Global CFO of Huawei has unnerved investors. To add more to it, domestic State elections results will be out on Tuesday that may just be the fuel for a short-term volatility.

The European markets did try to recover but lost much more as they are seen trading at almost close to two years now. This is a major decoupling from an established bullish market across the globe. hence loss aversion is now a key which is further triggered with continuous fall in crude oil; implicating a demand concern in the Global economy. A split outcome from OPEC also raised some concerns and took off support from tumbling crude oil prices.

A dark cloud cover is a bearish reversal pattern which indicates a potential reversal if followed with a confirmation. A Bearish candle preceded by a Bullish candle that closes within and below halfway mark of the previous candle. It simply indicates the upside range is dominated by bears. So it is a tough fight for the bullish trend to close above the level established at 10900. It is accompanied by a 50 % mark of its recent fall from 11800 to 10050.

The state elections result will be declared in Next week and will certainly provide a directional view to market amid volatility. Then we have Current account Q3 numbers that were previously seen reduced to $-15.8B. Industrial production which is at 4.5% Y/Y and Inflation at 3.31% and will be released in Next week. Followed by WPI numbers of manufacturing, Food, and Fuel.

So it's a week full of macroeconomic, political and global event and all will be consumed by investors. With this amount of Data, we expect noise to be louder than any tone/undertone of a trend developing that may be explicit. Hence we remain cautious.

To have a strategy within a consolidation will bring us more whipsaws hence a breakout is required above 10900 for an elevated upside.

Source : Equity Bulls

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