Trade setup: Nifty may consolidate a bit; follow buy-on-dips strategy
The stock market on Friday ended on a positive note with the NSE benchmark Nifty gaining 53.10 points or 0.48 per cent. The stocks remained flat on a weekly basis, and the Nifty remained within a congestion zone, which it created after breaking out above the falling trend line pattern resistance area. Broader markets too remained positive.
As we approach the fresh week, we expect a positive start to the trade. The no-confidence motion going in favour of ruling BJP government will remove volatility to some extend and give some positive fillip to the market. However, we expect the market to remain under positive consolidation for some time before it resumes the upmove and retest previous highs.
Monday is likely to see the levels of 11,065 and 11,150 working out as immediate resistance area for the Nifty. Supports are expected to come in at 11,950 and 11,910 zones.
The Relative Strength Index (RSI) on the daily chart stood at 61.7819, and it continues to remain neutral showing no divergence to the price. The daily MACD stays bullish while trading above its signal line. No significant formations were observed on the candles.
If we have a look at the pattern analysis, it is evident that the Nifty broke out above the falling trend line pattern resistance. After the breakout the Nifty is currently seen taking a breather and is again consolidating in a capped range. In the process, it is seen creating a flag-like formation. Such formations act as continuation patterns in most cases.
Overall, we recommend continuing to approach the market with a positive bias. Consolidation after an upmove is a sign of strength and as of now Nifty has shown no signs of any impending major downside turns.
The present structure of the market is more likely to favour the buy-on-declines approach than sell-on-rally strategy. High specific and stock specific purchases may be made at every opportunity while continuing to vigilantly protect profits at every up move.
Stocks to watch: Technically resilient setup was observed in stocks of Glaxo Consumer, Relaxo, Berger Paints, Bharat Electronics, Bajaj Finance, Infosys, JSW Steel, Indiabulls Real Estate, Motherson Sumi and RBL Bank.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)