Trade setup: Nifty may consolidate a bit before next leg of rally
On expected lines, the equity market consolidated at higher levels on Wednesday after the breakout over the previous few days. The NSE benchmark Nifty oscillated in a very capped range and ended flat with a negligible gain of 1.05 points or 0.01 per cent.
The Nifty may see further consolidation at higher levels even as the internal strength remained intact.
Thursday is likely to see a quiet start to the trade. The Nifty has set a stage wherein it is likely to inch higher, but it also possible that it may see minor consolidation before it moves higher.
Thursday is likely to see the levels of 10,965 and 11,150 as likely resistance area for the Nifty. Supports may come in lower at 10,850 and 10,810 zones.
The Relative Strength Index (RSI) on the daily chart is 62.9928, and it remains neutral showing no divergence against the price. It is important to note that the RSI has broken out of a pattern and is seen inching higher. The daily MACD stays bullish while it trades above its signal line. No significant formations were observed on the candles.
While having a look at the pattern analysis, the Nifty is seen consolidating at higher levels. It achieved a breakout above the falling trend line pattern resistance.
It is seen consolidating after breaking out from the resistance area.
Given the present structure of the charts, it is possible that it sees more consolidation at higher levels, but it continues to keep it under current strong and buoyant.
Overall, it will be no surprise if we see the Nifty taking some breather and continues to trade in a capped range for a while.
Market not retracing after couple of short moves on the upside demonstrates the underlying strength, and any consolidation, if any, will provide further strength for any upmove in future. Any down move, led by consolidation, will be limited.
We recommend continue making select purchases. By and large, a positive outlook is advised for the day.
STOCKS TO WATCH: Resilient technical setup was seen in stocks of Infosys, Sun Pharma, Eros International, Petronet, Hindustan Unilever, Bajaj Auto, Jubilant FoodWorks, Godrej Industries, Goa Carbons and TV Today.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)