Indian equity market halted its winning streak, as it consolidated on Tuesday, although in a bit volatile manner. The market remained under modest pressure immediately after opening in the green, and finally ended the day with Nifty50 losing 41.10 points or 0.38 per cent.
Going ahead from here, Nifty has established 10,800-mark as its all-important immediate resistance and we will see the Index oscillating in a defined range, while continuing to resist this point.
It should be noted that the undercurrent remains evidently bullish, and we will not see any significant downsides, but will certainly see some consolidation happening.
The levels of 10,745 and 10,800 will play out as immediate resistance area for the market. Supports come in at 10,645 and 10,610 levels. The Relative Strength Index (RSI) on the daily chart is 67.7798 and it has just crossed below from a topping formation. It does not show any bullish or bearish divergence and stays neutral.
The daily MACD continues to remain bullish, while trading above its signal line. An Engulfing Bearish candle on the charts show that the upmove may temporarily be halted and we may be pushed into some short consolidation once again.
The pattern analysis show the Nifty halting its upmove after breaking above the 10,490-mark. Having said this, it continues to display buoyant undercurrent and points towards some rangebound consolidation and no major downsides.
All in all, we may see this consolidation persisting for some time, however, the possibilities are very less that any major downtrend will emerge.
At the most, we expect the market to oscillate in a broad range while some volatility will remain ingrained in the market.
With no signs of any major downsides whatsoever, we recommend refraining from creating any major short positions. Though cash should be preserved and it is advised to remain highly stock specific.
However, long bias should be maintained while approaching the market on a cautious note.
STOCKS TO WATCH: Long positions continued to be seen being built on counters like Infibeam, ICICI Bank, Infosys, TCS, Wipro, HCL Tech, Ultratech, Ambuja Cememts, Hindustan Unilever and NTPC. Shorts were seen being added in stocks like Federal Bank, Suzlon, BEL, SAIL, JSW Energy, Ashok Leyland and State Bank of India.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])