After staying flat and rangebound for most part of the session on Tuesday, the market saw a sharp surge in the final hour of the trade, and as a result, the benchmark Nifty50 ended with a modest gain of 38.50 points or 0.37 per cent.
The market posted yet another lifetime closing high and the liquidity has not yet stopped to chase the momentum.
Going into trade on Wednesday, we will see volatility creeping in as well. We enter the penultimate day of the expiry of the current derivative series and we will see activities remain heavily dominated with rollovers.
Wednesday will see market facing a tricky situation. A breakout has been attempted from the 10,490 level, but we still require confirmation. Nifty will face resistance at 10,540 and 10585 levels.
The Relative Strength Index (RSI) on the daily chart is 65.5629 and it continued to mark its 14-period high, which is bullish. It does not show any divergence against the price.
The daily MACD stays bullish while trading above its signal line. A white body occurred on the candles, but it shows no significant formations with it. Pattern analysis shows an attempt to break out above the 10,490 by the market.
However, a meaningful rally is yet to happen and the market awaits confirmation for that. Daily Stochastic remains highly overbought. Overall, market is demonstrating buoyant intent and we are likely to see this continuing on Wednesday as well.
However, with expiry approaching, it is likely that volatility will also make its presence felt.
For the market to inch higher, it would be necessary to trade above the 10,490 level. Any dip below this will force the market into consolidation once again.
We recommend avoiding shorts completely. With the liquidity chasing the markets, up moves will remain prone to likely volatile profit taking bouts from higher levels. Exposures should be continued to be kept modest and profits should be heavily protected at higher levels.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)
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