Home Market Trade setup: Nifty likely to stay in a range before the next...

Trade setup: Nifty likely to stay in a range before the next leap

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Indian stock market witnessed an extremely rangebound session on Wednesday, as the Nifty spent the entire session in a capped range before ending with a negligible loss of 2.30 points or 0.02 per cent.

The broader stock market and sectoral indices also remained in a narrow trajectory and ended flat. Consolidation was across the board, and only metal, financial services and banks relatively outperformed.

The important point to note is that the market pared intraday gains and was pushed into consolidation the moment it neared its life-time high of 11,171.

This indicates that Nifty might continue to encounter resistance near this level, and it will be a while before it gives a meaningful breakout above its lifetime high.

We also enter expiry day of the current derivative series. The session is all set to remain dominated with rollover centric activities.

Thursday will likely see the levels of 11,170 and 11,235 acting as immediate resistance area, while supports may come in at 11,090 and 11,010 zones.

The Relative Strength Index (RSI) on the daily chart is 67.3969 and it continues to stay neutral showing no divergence against the price.

The daily MACD stays positive while trading above its signal line.
If we look at pattern analysis, breakout above the falling trendline had resulted into formation of a congestion zone.

Nifty has attempted to move out of it, but is encountering some resistance at lifetime high of 11,170.

Overall, the structure of the Nifty on technical charts remains intact. However, theres likelihood of some more consolidation before it makes a meaningful breakout above 11,170.

The Bollinger bands on the daily charts are getting wider without any significant move in the Nifty. This may keep the market in a range for some more time.

Also, in the coming days, inline performance of the broader markets and some betterment of the performance from the sectors who have been the laggards previously will be crucial.

Overall, while remaining cautious at higher levels, positive outlook is advised for the day.

STOCKS TO WATCH: Long positions were seen being added in stocks like PFC, ITC, National Aluminium, Infibeam, Vedanta, Hindalco, Hindustan Zinc, Tata Steel, ONGC, HDFC, Infosys, L&TFH, ITC and Wipro.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

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