Nifty continued with its winning momentum, and ended ninth straight session in the green, as it ended with a net gain of 20.35 points or 0.19 per cent on Tuesday.
Though the session ended with modest gains, it saw a V-shaped intraday recovery. What was seen on Tuesday was a classical consolidation, while the Nifty tested its important near-term resistance.
For Wednesday, as mentioned in our previous note, the levels of 10,550-10,575 will continue to pose immediate resistance.
Though underlying buoyancy remains very much visible, the market may continue to consolidate a bit more before a clear upmove continues.
The levels of 10,575 and 10,610 will act as immediate resistance area, while supports will come lower at 10,510 and 10,465 zones.
The Relative Strength Index (RSI) on the daily chart stands at 62.6075. While it remains bullish, forming a fresh 14-period high, it continues to remain neutral showing no divergences against the price.
The daily MACD stays bullish, while trading above its signal line. A Hanging Man that emerged on the candles shows likely creation of reversal top and can temporarily halt the upmove.
Pattern analysis shows the Nifty resisting to the 10,550-10,575 zones, which is the strong pattern resistance area for the Market. It is the upper range of the broad rectangle formation, which was created since February.
This range was breached, but during the pullback, the Nifty managed to crawl back inside it. Overall, there are no doubts that the undercurrent remains extremely bullish.
The Nifty is adding open interest with each upmove, this shows buoyant intent of the market participants. However, given the overstretched nature of few oscillators and given the present structure of the charts, some consolidation in form of rangebound movements with limited downsides remains imminent.
This will bring with itself fair amount of volatility as well. We reiterate our advice of protecting profits at higher levels while continuing to rotate stocks effectively while maintaining a cautious view on the market.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])