Ahead of Market: 12 things that will decide stock action on Friday

NEW DELHI: Nifty snapped its three day winning streak to end lower on Thursday and formed an indecisive ‘Doji’ candle on the daily chart.

Chandan Taparia of Motilal Oswal Securities said that the index is in process to form a ‘Spinning Top’ candle on a weekly scale.

“Price formation indicates that declines are being bought, but follow up buying momentum is missing at higher zones. The index requires surpassing the recent swing highs to commence the next movement,” he said.

Vinod Nair of Geojit Financial Services said investors are advised to remain cautious and another round of losses, similar to today, can bring in negativity into the markets.

Ajit Mishra of Religare Broking said the benchmark index has been gradually inching higher amid positive yet volatile global markets and this scenario shouldn’t be changing anytime soon.

“At the same time, noticeable traction in the broader space is offering ample opportunities to the traders. We reiterate our view to focus more on the selection of stocks and trade management,” he said.

Nagaraj Shetti of HDFC securities said the short-term trend of Nifty is slightly negative.

“The overall uptrend status remains intact, as long as the area of 11,100 is protected. There is a possibility of minor weakness in the next 1 or 2 sessions with range bound action. There is a higher chance of upside bounce from the lower support of 11,200 levels in the short-term. Immediate resistance is now placed around 11,400 and 11,460,” he said.

That said here’s a look at what some of the key indicators are suggesting for Friday’s action:

US stocks slips as jobless claims rise
The S&P 500 and the Dow slipped further on Thursday after weekly jobless claims rose unexpectedly back above the 1 million mark last week, lending weight to the Federal Reserve’s view of a difficult road to economic recovery. The Dow Jones Industrial Average was down 78.78 points, or 0.28%, at 27,614.10 and the S&P 500 was down 3.68 points, or 0.11%, at 3,371.17. The Nasdaq Composite was up 37.47 points, or 0.34%, at 11,183.93.

European shares fall after Fed’s grim view
European stocks were hit by a wave of selling in global equity markets on Thursday after the U.S. Federal Reserve signalled a long and difficult path of recovery for the world’s largest economy. The pan-European STOXX 600 index fell 1%, led by miners due to weaker metal prices. Other economically sensitive sectors such as banks and automakers and oil and gas dropped between 1.2% and 2%.

Tech View: Analysts wonder if Nifty had a false breakout
Nifty50 came under selling pressure on Thursday, tracking weak global cues. The index negated higher highs and lows , and eventually formed an indecisive ‘Doji’ candle on the daily chart, raising concerns among analysts whether the index saw a ‘false breakout’ on Tuesday. The index is expected to stay range-bound, and sentiment is likely to turn negative should Nifty fall below its 20-day moving average, whose value is placed at 11,186 level.

Check out the candlestick formations in the latest trading sessions

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F&O: VIX cooling down suggests bullish stance
India VIX moved up 3.29 per cent to 20.61 level. Volatility inched higher slightly due to some profit booking decline, but overall it has cooled down gradually on a week-on-week basis, which suggests a bullish stance. A buy-on-decline strategy could continue in this market. Options data indicated a trading range between 11,100 level and the 11,500-11,600 zone for the coming few days.

Stocks showing bullish bias
Momentum indicator Moving Average Convergence Divergence (MACD) on Thursday showed bullish trade setup on the counters of Future Consumer, Indian Oil Corp, HDFC Bank, Hikal, GSS Infotech, Mahanagar Gas, Adani Transmission, VIP Industries, Cosmo Films, Orient Cement, Liberty Shoes, Dolat Investment, Aster DM Healthcare, Mastek, Balkrishna Industries, Astec Lifesciences, Harrisons Malaya, Safari Industries, Jiya Eco Products, Refex Industries, Control Print, Crisil, Williamson Magor, Sanginita Chemicals, V Mart Retail, Oriental Carbon, Sheela Foam, Creative Peripherals, Hinduja Global Solutions, Esab India, Keynote Financial, The Indian Card Clot and Salona Cotspin among others.

Stocks signalling weakness ahead
The MACD showed bearish signs on the counters of SBI, ITC, Axis Bank, Cipla, Tin Plate, Bajaj Auto, Bharat Dynamics, Wockhardt, PI Industries, Dalmia Bharat Sugar, Vidhi Specialty Food, Bombay Burmah, Quess Corp, Solara Active Pharma, PTL Enterprises, TRF, The Anup Engineering, Vaibhav Global, Vishnu Chemicals, Gujarat Apollo Industries, Balaxi Ventures and NBI Industrial Finance. Bearish crossover on the MACD on these counters indicated that they have just begun their downward journey.

Most active stocks in value terms
Zee Entertainment (Rs 3328.93 crore) , ICICI Bank (Rs 2508.11 crore) , RIL (Rs 2189.72 crore) , Bajaj Finance (Rs 1245.28 crore) , NTPC (Rs 1120.69 crore) , Muthoot Finance (Rs 1089.58 crore) , HDFC Bank (Rs 1017.72 crore) , BPCL (Rs 759.22 crore) , SBI (Rs 730.49 crore) and Axis Bank (Rs 728.63 crore) were among the most active stocks on Dalal Street on Thursday in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Most active stocks in volume terms
YES Bank (shares traded: 40.11 crore) , Zee Entertainment (shares traded: 16.59 crore) , Vodafone Idea (shares traded: 15.21 crore) , Tata Power (shares traded: 11.71 crore) , NTPC (shares traded: 11.23 crore) , Ashok Leyland (shares traded: 8.59 crore) , ICICI Bank (shares traded: 6.84 crore) , Future Consumer (shares traded: 6.11 crore) , BHEL (shares traded: 5.21 crore) and PNB (shares traded: 4.56 crore) were among the most traded stocks in the session.

Stocks seeing buying interest
ABB Power Products , Aditya Birla Fashion (PP), Essel Propack, Torrent Power and JSPL witnessed strong buying interest from market participants as they scaled their fresh 52-week highs on Thursday signalling bullish sentiment.

Stocks seeing selling pressure
Zenith Steel Pipes & Industries witnessed strong selling pressure in Thursday’s session and hit its 52-week lows, signalling bearish sentiment on this counter.

Sentiment meter favours bulls
Overall, market breadth remained in favour of bulls. As many as 257 stocks on the BSE 500 index settled the day in green, while 240 settled the day in red.

Podcast: Is market action shifting to midcaps, smallcaps? >>>
The selloff that began in the last half-an-hour of Wednesday’s session continued on Thursday, as grim outlook for US economy in the Fed minutes made investors turn cautious. The 30-pack closed 394 points down at 38,220, while Nifty fell 96 points to 11,312. We caught up with Vinod Nair, Head of Research, Geojit Financial Services to try and understand the market undercurrent.