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Nifty outlook: Market may not see major fall, but any rise may spark profit taking

The domestic equity market has started the December derivati..

The domestic equity market has started the December derivative series on a subdued note, displaying a muted bias in Fridays trade. Some consolidation was seen as Nifty drifted after opening higher. The market pared all the gains of the day by afternoon trade, and the index slipped into the negative zone.

However, the last hour of trade saw some recovery, which bought the Nifty into the positive zone. The benchmark index ended the day 18.05 points, or 0.17 per cent, higher.

As we begin the fresh week, we expect Mondays session to mark a quiet start to the week. We expect to see the market open on a subdued mode and consolidate some more in a defined range. With each higher level, the index is likely to show some tendency to consolidate despite the underlying positive bias.

Nifty is likely to see the 10,920 and 10,960 levels act as the immediate resistance, while supports should come in at 10,835 and 10,760 levels.

The Relative Strength Index (RSI) on the daily chart stood at 62.2801 and it has marked a fresh 14-period high, which is a bullish signal. The daily MACD is bullish and it trades above the signal line. Nifty continues to close above its upper Bollinger Band. This combined with the a steep upward move that the index has witnessed over the past couple of days suggests that the uptrend is likely to continue.

However, a short-term pullback inside the trend is likely, which may push the market into consolidation on the expected lines. Nifty has managed to penetrate its 200-DMA and inched higher. Going forward, it is expected to face resistance at its 100-DMA at 10,957.

Overall, the markets underlying bias remains positive. Despite this, we still see Nifty consolidate at current or higher levels. Each marginal upward move will take the market near its overhead resistance of 100-DMA and this will make some more consolidation to creep into the market. Given such technical chart structures, it may so happen that the market will not see any major corrective downsides, but upward moves may lead to some profit taking at higher levels. We suggest avoiding shorts and keeping fresh purchases limited. Investors should protect profits at higher levels and approach the market cautiously.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

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