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Market outlook: Nifty likely to test 10,490, may face profit-taking at higher level

On the expected lines, the market continued with their upmov..

On the expected lines, the market continued with their upmove and had a follow-through session on Tuesday, as the Index inched higher and ended the day with a net gain of 74.45 points or 0.72 per cent.

The session remained within the defined parameters as the Nifty moved closer to its life-time high level of 10,490.

Wednesday is likely to see a quiet to modestly positive opening. In all likelihood, the Nifty may attempt to test 10,490 levels, but at the same time, it would be immensely important to observe the behaviour of the market vis-a-vis this lifetime high level of 10,490, which is likely to pose resistance to the market.

The levels of 10,490 and 10,535 will play out as resistance levels for Wednesday. Supports come in lower at 10,390 and 10,335 zones.

The Relative Strength Index (RSI) on the daily chart is 62.6297 and it has marked a fresh 14-period high, which is bullish. The daily MACD is bullish while trading above its signal line. No significant formations were seen on candles.

Going by pattern analysis, the Nifty has successfully managed to break out of the falling channel, which was formed as its intermediate trend. The moving past of Nifty significantly above 10,490 would be important for a sustainable upmove to occur. Until this happens, we may again see the market being forced into consolidation.

All in all, buoyant undercurrent may continue. However, while we approach the levels of 10,490 and before a significant breakout occurs, we may see some profit-taking happening at higher levels. The market remains vulnerable to some minor profit-taking bouts and this may instill some volatility into the market in general. We recommend making stock-specific purchases at modest levels and concentrate more in protecting profits at higher levels.

STOCKS TO WATCH: Long positions were seen being added in SAIL, Suzlon, Tata Power, Idea, Reliance Communications, Vedanta, Bharti Airtel and Mahindra & Mahindra. On the other hand, short covering was seen in stocks like Adani Power, Wipro, Dish TV, Bank of Baroda, Sun Pharma, Castrol and HDFC.
(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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