Markets

Trade setup: Nifty50 must top 10,600-10,650 to extend rally

The resistance zone of 10,600-10,650 against proved to be difficult for the NSE benchmark Nifty to breach on Wednesday. The market enjoyed a positive start, but gave up all the gains, as the Nifty neared the 10,651 mark. From the high point of the day, the index pared a 120-point gain and ended with a small loss of 6.20 points or 0.06 per cent.

I was expected that the 10,600-10,650 zone will continue to pose a threat to the Nifty in the immediate short term.

Looking ahead, a quiet start to the trade is expected on Thursday, and we will see the Nifty struggling to move past this important zone.

The trajectory that the market form after opening and the behavior of Nifty vis-à-vis the 10,600-10,650 levels will be critically important to watch for.

Thursday is likely to see the levels of 10,650 and 10,695 acting as immediate resistance area for Nifty. Supports may come in at 10,535 and 10,480.

The Relative Strength Index (RSI) on the daily chart stood at 51.9863. The RSI remained neutral and showed no divergence against the price. The daily MACD continued to stay bullish while trading above its signal line. No significant formations were observed on the candles.

If we run a pattern analysis on the charts, Nifty has continued to struggle with the falling trend line resistance of the sloping channel that it has formed over the past couple of weeks. The two major resistance for the Nifty remain the falling trend line and then the 200-DMA level going ahead.

Volatility is expected to remain ingrained in the market. There are changes that the Nifty continues to struggle with the 10600-10650 zones.

Unless this zone is effectively breached on the upside, the market will remain vulnerable to profit taking bouts at the higher levels. Given this technical setup, we recommend caution at higher levels. All the upmoves should be used to protect profits at higher levels. Cautious view is advised for the day.

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

Original Article