It was a gainful day for the markets once again as the Nifty went on to extend its up move and end with gains. Wednesdays trade has seen the index closing just below its 200-DMA.
Thursdays trade saw the index opening above its 200-DMA and when it corrected from a higher level, it rebounded exactly from there. Though it pared gains from the high point of the day, it recovered again and ended the day with gains of 53.95 points (+0.50 per cent).
Despite buoyant undercurrent and no fear in the markets, it is important to note that the Nifty has started to show signs of much expected consolidation to which markets are now prone to. We see a tentative start to the trade on Friday and expect the markets to take some breather from the pullback it is witnessing. With Thursdays trade, the Nifty has now pulled back over 500 points from the lows it saw on Tuesday.
Friday is likely to see the levels of 10,838 and 10,910 acting as resistance levels. Supports are expected to come in at 10,740 and 10,680.
The Relative Strength Index (RSI) on the Daily Chart is at 55.4077 and it continues to remain neutral showing no divergence against the price. Daily MACD remains bearish while trading below its signal line.
In the process, the Nifty has formed a small back body on the Candles, which resembles a kind of a Spinning Top. Such formations occur when market participants are indecisive at higher levels. Further pattern analysis reveals that the Nifty has encountered resistance at the falling trendline that joins the high of 11,760 with the subsequent
lower top of 10,950.
Fridays session is likely to exhibit tentative mood and we expect the Thursdays high of 10,838 to pose resistance in all probability. On the lower side, the behaviour of the Nifty as against the 200-DMA, which is at 10,754, will be key.
In all likelihood, we expect markets to remain tentative and continue to consolidate at higher levels.
We strongly suggest avoiding fresh purchases at higher levels and concentrate more on protecting profits with each upmove that the markets offer.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)