Trade setup: RSI neutral, MACD bullish; Nifty headed nowhere
A day after paring 120 points from the high point of the day, the Nifty continued to remain weak on Wednesday, as it opened with a modest gapdown and drifted lower during the session.
The market made an attempt to recover from the days lows, but ended the trade losing 60.75 points or 0.56 per cent.
While keeping aside the prevailing uncertainties over Karnataka politics – even though it had short-lived sentimental effect — the present technicals continue to point towards more consolidation.
We are likely to see a quiet opening on Thursday, and the previous days low and its range would be an important support to watch out for. The zones of 10,680-10,700 would be immediate levels wherein the Nifty might consolidate again. Thursday will see the levels of 10,745 and 10,785 acting as immediate resistance. Supports will come in at 10,680 and 10,625.
The Relative Strength Index (RSI) on the daily chart is 60.1660, and it continues to remain neutral showing no divergence against the price. The daily MACD stays bullish, while trading above its signal line. On the candles, a Spinning Top was formed. It has a small real body and signifies a session full of indecisiveness on part of market participants.
Pattern analysis reveals that the Nifty has stalled its upmove, which it had resumed after suffering a throwback. The index has broken out of a broad rectangle formation as evident from the charts. However, even after a throwback and subsequent resumption of the upmove, the Nifty still appears to remain under consolidation.
Overall, though we can expect some stability to come in, volatility is still likely to remain very much ingrained in the session. Though any structural breakdown may not happen, still oscillations within a given range are likely to remain volatile.
Also, the higher levels of Nifty PCR (Put to Call Ratio) still remain a concern.
We expect consolidation to continue, as the Nifty is likely to oscillate keeping the range of 10,785-10,930 as its major resistance area for the immediate short term.
Highly cautious and stock specific approach is advised for the day.
STOCKS TO WATCH: Selective longs were added in stocks such as ITC, PTC, Jain Irrigation, IRB, HCC, Escorts, Dish TV, Tech Mahindra, Dabur, Capital First, Nalco, Motherson Sumi, YES Bank and Asian Paints.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)