The previous session saw the markets coming off from their highs; it finally consolidated and ended the day with a modest loss. Markets saw a strong start to the day; it opened positive and edged higher towards the afternoon trade. While the NIFTY just marked its fresh lifetime high; a wave of corrective profit-taking took over. This saw the NIFTY coming off from its intraday high levels. The index slipped in the negative territory as it came off over 250-odd points from the high point of the day. However, no major downsides were seen from the previous closing basis. The headline index finally settled with a net loss of 44.35 points (-0.25%).
From the technical perspective, Friday’s session has marked a potential onset of some consolidation in the overbought markets. The high point of 17792 has potentially become an intermediate top and most immediate resistance for the NIFTY; any fresh strong moves on the upside will take place only after the index moves past this level convincingly. Until this happens, we will see the index consolidating in a broad range with the zone of 17350-17400 acting as the lower supports. The volatility spiked as well; INDIAVIX surged 5.69% to 15.2325.
Monday will see a tepid start to the week. The markets are likely to find resistance at 17625 and 17700 levels. The supports come in at 17530 and 17480 levels.
The Relative Strength Index (RSI) on the daily chart is 81.78; it remains neutral and does not show any divergence against the price. RSI, however, continues to stay in overbought territory. The daily MACD is bullish and remains above the signal line. A black candle emerged; no other formations were noticed on the charts.
The pattern analysis shows that the breakout that occurred as the NIFTY moved above the 15900-15950 zone still continues to remain intact. The index has shown the behavior of making incremental highs, taking a breather through some consolidation, and resuming its up move. It has created multiple basing points in between. The recent high of 17792 has become support; the most immediate basing point of 17350-17400 is expected to act as an immediate support zone.
All in all, some range-bound consolidation looks imminent, and in fact, overdue. This happens, it would be healthy for the markets given the near-parabolic up moves that are seen over the past couple of days. However, even if the markets consolidate, then it will continue to see stock/sector-specific moves. It is suggested to avoid aggressive shorts and continue taking long positions in relatively strong stocks showing incremental relative strengths. A cautiously positive outlook is advised for the day.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
