Indian equity market made a robust start to the week as the benchmark Nifty50 opened higher, albeit on expected lines. It scaled yet another fresh peak, and though came off slightly from the high point of the day, it still posted a gain of 60.30 points or 0.56 per cent.
Market has not officially confirmed its breakout from the 10,490-mark and has placed itself into unchartered territory. We expect yet another modestly positive start to the market.
However, going into trade on Tuesday, we cannot ignore the fact that the market is now overbought and may face stiff overhead resistance in the 10,800-10,850 zones, while it tests the 24-month long upward rising trend line on the weekly charts.
The levels of 10,780 and 10,825 will play out as immediate resistance area, while the supports will come in at 10,690 and 10,610 zones.
The Relative Strength Index (RSI) on the daily chart is 72.9336 and has marked a fresh 14-period high, which is bullish. Daily MACD stays bullish, while trading above its signal line.
On the candles, a Rising Window occurred. Normally this would imply continuation of uptrend. However, in the present context of the market being overbought in nature, it might have to make extra efforts for the continuation of upmove.
The pattern analysis shows the Nifty comfortably cruising ahead after a breakout from the 10,490-mark after a brief breather and consolidation in between. It is clearly seen inching higher towards its overhead resistance area, which falls near the 10,800-10850 levels.
Overall, the structure of the chart and the F&O data point towards likely continuation of upmove, we cannot ignore the overbought nature of the market.
This may result into some volatile profit taking bouts from higher levels. However, as of now, the intent of the market remains remarkably buoyant.
Though there is some more steam left in the market to inch higher, we recommend making select purchases. However, this should be done with extreme caution and with very vigilant protection of profits at higher levels.
STOCKS TO WATCH: Long positions were seen being built on counters like HDFC, ICICI Bank, SAIL, Axis Bank, Kotak Bank, state bank of india, NTPC and India Cements. Shorts were seen being piled up in stocks like Adani Power, IDFC Bank, ITC, Ashok Leyland, ONGC, Tata Motors and Hindalco.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])