The week began with equities surging across the board and this saw markets ending the day on a strong note.
The morning trade remained tentative as the Nifty oscillated in a capped range. The second half saw the markets getting stronger and surging. Except for the metal and pharma stocks, the upmove remained secular and the Nifty ended the day with gains of 101.85 points (+0.97 per cent).
Looking from the technical perspective, the markets took support at the falling trend line of the channel that it breached on the upside. This pattern support also coincides with the short term 20-DMA which is in close proximity of this pattern support. With the Nifty holding this support, it has chosen to consolidate rather than move back inside the falling channel.
With the markets ending near the high point of the day, Tuesday is likely to witness a positive start to the trade and the upmove is likely to extend itself, at least in the initial trade. However, going ahead, the Nifty approaches the 50-DMA which is at 10,659 followed by 200-DMA at 10,743. This zone will continue to post stiff resistance to the markets going ahead.
Tuesday is likely to see the Nifty finding resistance at 10,659 and 10,743. Supports will come in at 10,550 and 10,480.
The Relative Strength Index, RSI, on the Daily Chart is 52.5784 and it stays neutral showing no divergence against the price. The Daily MACD continues to remain bullish as it trades above its signal line. However, it is seen narrowing its trajectory.
Though the markets saw a secular surge in the previous session and ended with gains, it remains in a technically turbulent zone. The levels of the short term 20-DMA and the pattern support of the upper falling trend line of the channel may have acted as support. The Nifty is yet to negotiate the critically important zone between 10,659 and 10,743, which represent the 50-DMA and 200-DMA, respectively.
When the markets approach this zone, we can once again expect turbulence and possibility of the Nifty becoming vulnerable once again to volatile moves from higher levels cannot be ruled out. While adopting a cautious view on the markets, all upmoves should be utilised in protecting profits at higher levels.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)