Friday was the strong and trending day for the markets as the NIFTY opened on a quiet note but trended higher during the day to end with decent gains. The markets saw a modestly negative opening but soon crawled inside the positive territory. The Index tested the important 17500 resistance but continued to maintain gains around this level. In the second half of the trade, the NIFTY got stronger as it moved past this resistance point. The headline index ended on a strong note; it closed higher with net gains of 205.70 points (+1.18%).
There are strong possibilities that the markets may consolidate a bit initially but ultimately extends their up move. The opening to the fresh week may be on a quiet note; the most recent price action has dragged the support points higher for the NIFTY. The level of 17500 was a resistance point for the index here; now that it has been taken out, all consolidation moves are expected to seek support at 17500 levels. If the extension of the moves takes place with 17500 as potential support over the coming days, the possibility of the NIFTY testing a double top resistance near 17800 cannot be ruled out. This forms a higher trading range for the NIFTY between 17500-17800 levels over the coming days.
Monday is likely to see the levels of 17700 and 17790 acting as potential resistance points. The supports come in at 17580 and 17510 levels.
The Relative Strength Index (RSI) on the daily chart is 62.73; it has marked a new 14-period high which is bullish. The RSI continues to stay neutral as it does not show any divergence against the price. The daily MACD is bullish and stays above the signal line.
The pattern analysis shows that after resisting to the level of 17500 for several days, the NIFTY has finally attempted to break out of this consolidation zone. In the event of any consolidation, the level of 17500, which was a resistance level earlier, is now expected to act as support.
The current month NIFTY futures OI has declined by over 3.63 lakh shares or 2.97%. The up move in NIFTY coming with a decrease in OI shows that the up move has been driven by short-covering. For the up move to get extended, it would be important to see that further moves are led by fresh buying. Until this happens, the sustainability of the moves on the higher side will be under question. So far, the technical setup stays buoyant; it is recommended that all moves on the downside should be used to make quality purchases. A cautiously positive approach 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)
