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Market outlook: Nifty ripe for some consolidation; stay light

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The markets continued with its surge on Wednesday as it saw a strong opening, and this took the Nifty well past its 50-DMA. The second half got even stronger and the markets not only crossed its short term 20-DMA but went on to test the 200-DMA at 10,752. After a sustained surge which remained across the board and secular, the benchmark index closed with gains of 188.45 points (+1.79 per cent).

Though the undercurrent remains buoyant, we cannot rule out consolidation at the current juncture. Thursday might witness a quiet start to the trade and with each upmove that the markets get, it will become even more prone to some consolidation. From the lows of Tuesday, the Nifty has seen a surge of over 440 points in just two sessions.

It would be no surprise if the index takes some breather at this stage. The Nifty has ended just below the 200-DMA and the behaviour of the index against the level of 200-DMA will be important.

The levels of 10,752 and 10,830 will act as immediate resistance area for the markets. Supports come in at 10,680 and 10,610.

The Relative Strength Index (RSI) on the Daily Chart is 53.4189 and it remains neutral showing no divergence against the price. Daily MACD still remains bearish and trades below its signal line. The Nifty has formed a strong bullish candle showing continued strong upmove. Other lead indicators remain neutral.

The pattern analysis shows that yesterday, the Nifty had ended at its 50-DMA. Wednesdays positive opening took it past this level and at the end of the day, the NSE index has ended just below its 200-DMA, which is presently at 10,752.

After over 440 points of rise from the lows that were seen on Tuesday, the Nifty is ripe for some consolidation. However, if the markets in general refuse to take some breather, all upmoves should be utilised to protect profits at higher levels. In the event of any consolidation, the downsides, though, are likely to remain limited.

We recommend continuing staying light on position and utilise all consolidation moves to pick stocks on a selective note. Undercurrent continues to remain intact.

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

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