After deliberating in the first half of the session, the Nifty attempted to move past its 50-DMA and 200-DMA levels. The market ended in the green for the sixth session in a row with the NIFTY gaining 41.50 points or 0.40 per cent.
The market saw a brief consolidation near the 50-DMA and the 100-DMA mark, which remained in close vicinity at 10,413 and 10,444, respectively.
As we approach the last trading day of the week, we may again see market opening on a quiet note. The zone of 10,480-10,500 will be important, and if these are not clearly breached on the upside, the market still remains prone to consolidation and some profit taking at higher levels.
However, the undercurrent continues to remain buoyant. The levels of 10,480 and 10,535 will play out as immediate resistance area for the market. Supports came in at 10,415 and 10,365 levels.
The RSI on the daily chart is 58.4023, and it has marked a yet another 14-period high, which is bullish. However, RSI continues to remain neutral showing no divergence against the price.
The daily MACD stays bullish while trading above its signal line. On the candles, and engulfing bullish line occurred. This is not outrightly bearish but it certainly warrants some caution at current levels, as this formation has occurred after an upmove. This has potential to halt the rally temporarily and push the market into some consolidation.
As of now, pattern analysis suggests that Nifty has managed to inch higher than its 50-DMA and 100-DMA, and has managed to close a notch above that. However, given the present structure of the chart, we still cannot rule out some consolidation at higher levels.
Overall, there is no denying the fact that the undercurrent remains buoyant. However, we cannot overlook the present short term formations, which point towards likely consolidation happening at current levels.
We see high probability of the market, witnessing some profit taking bouts at higher levels with very limited downsides. Also, the high PCR levels (Put to Call Ratio Levels) too point towards some likely pause in the upmove.
While expecting markets to consolidate at higher levels, we advise vigilant protection of profits at higher levels, while continuing to use downsides to make select purchases.
STOCKS TO WATCH: Favourable technical setup was observed in stocks such as KPIT, TCS, Subex, Infibeam, M&M Financial, Camlin Fine Sciences, Radico Khaitan, Cyient, Tata Chemicals and Jai Bharat Maruti.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)