After a range bound consolidation in the first half of the session, the benchmark Nifty50 extended its gains on Thursday, as it closed with a net gain of 61.60 points or 0.59 per cent.
With this, the market has made yet another attempt to breakout above the 10,490-10,535 zones.
Going into trade on Friday, we expect a quiet to positive opening in the market. Though the session will remain dominated with select pockets of out-performance, we expect the upmove to continue, while the Nifty attempts to break free of the 10,490-10,535 resistance zone.
The levels of 10,535 and 10,630 will play out as resistance area for the market in event of continuation of upmove. The supports come in at 10,490 and 10,435 area.
The Relative Strength Index – RSI on the Daily Chart is 60.0085 and it remains neutral showing no divergence against the price. The daily MACD is bullish, while it trades above its signal line.
On the candles, a white body occurred. The present structure on the candles does not offer any significant formations. Going by pattern analysis, it is clear that the 10,490-10,535 zones have been offering stiff resistance to the market.
A narrow congestion area has developed and the Nifty is seen oscillating in a capped range over some days now. It has made an attempt to break above this area again. The RSI is seen forming higher bottoms as well while continuing to stay neutral.
Overall, though no breakout has yet been achieved, the Nifty has certainly moved in a way that it attempts to breakout above 10,490-10,535 zones again.
Friday's opening would be crucial. It would be important for the market to move past the 10,535-mark. A confirmation to this is awaited. Unless Nifty moves past these levels, it may remain range bound and be once again pushed into some more consolidation.
Select pockets like stocks from PSU banks, financial services and Auto may attempt to relatively outperform. While continuing to avoid shorts, modest selective purchases may be made. Continuing to maintain cautiously positive outlook is advised for the day.
STOCKS TO WATCH: Short covering was seen in stocks like Reliance Power, RCom, Fortis, IFCI, Bank of Baroda, Ujjivan, Engineers India and Hindustan Zinc. Longs were seen being added in Jain Irrigation, State Bank of India, Jindal Steel, ICICI Bank and Tata Steel.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)