After two days of minor consolidation, the market resumed its upward move on Monday with a gapup opening, and scaling a bit higher during the session.
The NSE benchmark Nifty50, though came off a bit from the high point of the day and ended with gain of 60.75 points or 0.55 per cent.
Though the frontline stocks performed well, the pain was evident in the broader market.
While we go into the trade on Tuesday, we expect these cracks in the broader market to persist for some time while the Nifty attempts to scale higher. We continue to remain buoyant on the immediate outlook, but also sound caution as gross under-performance in the broader market may remain for some time.
The levels of 11,155 and 11,235 will continue to remain immediate resistance area for the market. Supports come in lower at 11,105 and 11,065 zones.
The Relative Strength Index (RSI) on the daily chart is 82.2992 and it remains in overbought territory. It also show a bearish divergence as while the Nifty marked a fresh 14-period high, RSI did not do so. A white body emerged on candles, but it remains insignificant in the present context and structure of the charts.
The pattern analysis shows that the breakout achieved by Nifty after moving past 10,490-mark remains firmly in place. There are minor signs of fatigue at higher levels and given the overbought nature of the market, we need to take this with some caution.
Overall, there is no denial to the fact that the liquidity is chasing the momentum. However, the important point that draws our attention is that the smart money is chasing the largecaps, while the broader market has started to consolidate and show minor internal corrective cracks.
We recommend remaining extremely cautious at current levels. Though traders are left with little option but to chase the momentum, this should be done with great care remaining highly selective while picking stocks. Cautious outlook is advised for the day.
STOCKS TO WATCH: Fresh long positions were seen being created in stocks like Ashok Leyland, Jain Irrigation, Tata Steel, Vedanta, HDFC, DishTV, Larsen and Toubro and Maruti.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
[contf] [contfnew] 
ET Markets
[contfnewc] [contfnewc]
