Market course hinges on today's close

Indian stock market is moving in a directionless path. The benchmark indices Nifty and Sensex gained over 1.2 per cent last week. This positive trend extended to Midcap and Smallcap indices which made 2.3 and 3.2 per cent gains respectively.

The market rally led by PSU banks and followed by realty sectors. Realty sector stocks went up in anticipation of stimulus package announcement by Finance Minister and news of capital infusion boosted PSU bank stocks.

Nifty is still trading in August month's range. August month's high or low is not yet breached. On a weekly chart, Nifty made a big body bullish candle last week after two weeks of a small body, long shadows candles. On the daily chart, market is indecisive in nature.

On Wednesday, Nifty formed a Doji and on Thursday it formed with a big red candle. Everyone expected back-to-back bearish bars will lead to a downswing.

But on Friday, after breaching Thursday's low, it bounced back sharply and closed at 10 day's high. These bull and bear fights near the multiple resistance points are creating some curiosity among traders.

With last week's positive closing, everyone turned bullish. But, before turning bullish, we need to consider the current structure.

As I mentioned earlier, Nifty can climb to 11,370-11,544 zone only after it breaches 11,147-11,200 range. This range breakout will confirm the inverted head and shoulder pattern. This pattern breakout targets also point towards 11544.

When market goes through a consolidation phase, any kind of breakout from the sideways range will be a euphoric one. A decisive breakout above 11,200 will take the index to a 11,544 level. A decisive close below 10,940 will take the index to 10,746 and below.

However, markets will be in bear grip if Nifty falls below 10,746. Within this range, stock-specific activity will increase. Further, some evidence points towards an upside breakout. The RSI moved out of a symmetrical triangle, forming higher highs and lows.

Nifty witnessed rise in volumes in last two trading sessions. This indicates that bulls are trying to get a grip on the market. The MACD is still below the zero line. Though MACD line is above the signal line, it is considered to be a pullback as long as MACD line is below zero line.

The histogram suggests momentum is picking up, but, for the past two months, the upside momentum stopped at the current level. There are several other factors as well. Broader indices like Nifty 500, Nifty Midcap 100 and Small cap 100 indices are also showing some signs of recovery. The momentum in these indices will impact the overall market sentiment.

On the bearish side, the death cross already in place. The 50DMA is already below 200DMA. The 200 EMA is showing down trend. The 10-period DonChain line is below the 40-period DonChain line. This indicates extreme bearishness on a weekly chart.

The current upswing is the longest swing since August 5. The current swing is now seven-days old and all prior swings in this current consolidation period lasted for a maximum five days. Historically, the majority of the swings in minor trends lasted for a maximum of eight days.

It is to be seen whether current upswing will extend its gains further or not. In this background, Monday close could be a decisive one for the bulls. Any failure or negative close will demoralise the bulls.

Saudi Arabia's Aramco oil accounts for five per cent of global oil supplies and its plants have been hit by fire mishap. This could push up crude oil prices sharply.

The incident impacts currency markets and equity markets. This global risk event will definitively impact our markets. Keep a close watch on these developments.

(The author is a financial journalist and technical analyst.He can be reached at tbchary@gmail.com)