In complete contrast to what was expected, the expiry of the November series showed no volatility at all. The Markets opened higher, got stronger as the day progressed and ended the day with decent gains. Though the breadth of the market was not as healthy as it should be, the benchmark Nifty still went higher and closed with gains of 129.85 points (+1.21 per cent).
With the market ending near the high point of the day, we can expect Fridays trade to start on some modestly positive note. The plain look on the charts suggests strength, but we need to take note that all the previous gains, including those of Thursdays session, have come with negative and fractured market breadth. It has not been as strong as it should have been otherwise.
If we see gains getting extended on Friday, it would be the time to get extremely cautious on the market. Friday is likely to see the levels of 10,890 and 10,965 acting as immediate resistance while supports come in at 10,780 and 10,710.
The Relative Strength Index – RSI – on the Daily Chart is 61.6407 and has marked a fresh 14-period high, which is bullish. RSI does not show any divergence against the price. The daily MACD stays bullish while trading above its signal line. Another rising window emerged on candles. This usually implies a gap-up and continuation of the upmove.
The pattern analysis suggests that the Nifty has attempted to move past the gap of 10,754-10,840 formed in the first week of October. It has closed a notch above this area. It would be important to see if it manages to stay above this range. If this happens, we may see it testing its 100-DMA in coming days, which is at 10,955.
The Nifty has closed outside its upper Bollinger band. Though this potentially suggests continuation of uptrend, some short-term pullback inside the band is likely. We expect the Nifty to consolidate at higher levels. The upmove has been happening on unhealthy market breadth and this, just like previous session, continues to remain a concern.
We recommend a high degree of caution at higher levels and advise continued protection of profits with each upmove that the market may offer. Fresh purchases, if any, should be kept extremely limited and defensive in nature.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)