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Nifty outlook: Expect positive start & some more pullback on Monday

After surviving the recent lows in Thursdays trade and manag..

After surviving the recent lows in Thursdays trade and managing to keep its head above the 10,180-10,250 zone, the Nifty50 continued its pullback in Fridays session. The market saw a positive opening and during the session, it went on to further strengthen itself.

The surge was secular, as all sectoral indices, barring IT, ended the day with gains. The benchmark index ended the day 237.85 points, or 2.32 per cent, higher.

As we step into a new week, we expect a positive start to Mondays trade. Nifty has managed to move past its important pattern resistance level at 10,400. With a positive start to trade, we expect the market to continue its pullback. In the event of any consolidation, the 10,400 level is expected to offer good support to Nifty.

The 10,510 and 10,575 levels are likely to act as potential resistance area for Nifty50. Supports are expected to come in at 10,400 and 10,330 levels.

The RSI on the daily chart stood at 36.8266 and it remained neutral showing no divergence against price. The daily MACD remains bearish as it trades below its signal line. It is seen flattening its trajectory. A white-body occurred on the candles. The market has bounced back from its support area and shown signs of a potential bottom formation for the immediate short term.

Fridays bounce has come on the back of sharp short covering and there are enough signs that the market is in the process of marking and confirming its near-term bottom. In Mondays trade and in subsequent sessions, it would be important to see that the short covering is accompanied by buying at lower levels.

In any case, Nifty must maintain itself above the 10,400 mark to continue with its upward move. In the event of any consolidation from higher level, the 10,400 mark will be important to watch. Any dip below this mark will again infuse some weakness in the market.

Overall, we continue to recommend making select purchases at lower levels. It is also advised to remain highly selective and rotate sectors effectively.

Stocks to watch:
On Friday, short covering was seen in PNB, ITC, Jindal Steel, Hindalco, HCC, Bharti Airtel, Tata Steel, BPCL, IDBI, Dabur, Vedanta, Federal Bank, Gail, HDFC and Tata Motors.

(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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