Nifty50 to open positive but may consolidate near 100-DMA level
The domestic equity market failed to continue its winning momentum as Nifty50 turned volatile in the last hour of the trade to end flat.
The index settled with a gain of 5.45 points or 0.05 per cent after falling nearly 100 points from the day’s high and then recovering 50 points.
From the Tuesday’s trade, we can draw inference that Nifty chose to consolidate after it resisted to the 100-DMA, which stands at 10,456. Nifty failed to go past these levels on close basis, and these levels now offer resistance for the immediate short term.
While we approach Wednesday’s trade, there are chances that we once again see a modestly positive start to the trade. However, despite chances that Nifty may attempt to move past its 100-DMA, it would be technically important for it to close above these levels.
Wednesday’s trade is likely to see levels of 10,460 and 10,515 playing out as resistance are for the market. Supports come in at 10,410 and 10,350 zones.
The Relative Strength Index (RSI) on the daily chart is 48.3044 and it continues to remain neutral against the price showing no divergences of any kind. The daily MACD has turned positive. It has reported a positive crossover and it is now bullish while trading above its signal line. No major formations were observed on candles.
If we look at pattern analysis, with the Nifty pulling itself above the 10,275-10,300 zones, it has now once again entered the trading zone. Also, it has re-established the level of 10,275 as its immediate important pattern support followed by the 200-DMA.
All in all, we might see some consolidation happening near the 100-DMA mark, but overall the market is likely to exhibit a positive bias in the trade.
There might be some volatility getting ingrained once again and we might see this volatility playing out as well if the Nifty deliberates near its 100-DMA. If the resistance persists near the 100-DMA mark for some time, it might result into some volatile profit taking bouts.
However, until the Nifty trades above the 10,275-mark, all these dips should be utilised to make select purchases.
While avoiding shorts and keeping overall positions moderate until an upward directional bias is established, continuance of positive outlook is advised for the day.
STOCKS TO WATCH: Shorts were seen being added on counters like TCS, Vedanta, Infosys, Coal India, Dabur, BHEL, Arvind, Castrol Industries and Hindalco. Fresh longs were observed in stocks like CGPower, State Bank of India, Ashok Leyland, RCom, Federal Bank, TV18 Broadcast and NCC.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)