Friday was a strong and trending day for the domestic equity market as headline index Nifty opened on a quiet note but trended higher during the day to end with a decent gain.
Following a modestly negative opening, Nifty soon crawled inside the positive territory. The index tested the important 17,500 resistance but continued to maintain gains around this level. In the second half of the trade, Nifty got stronger as it moved past this resistance point. The headline index ended on a strong note with a net gain of 205.70 points or 1.18 per cent.
There are strong possibilities that the market may consolidate a bit initially but ultimately extends its up move. The opening to the fresh week may be on a quiet note. The most recent price action has dragged the support points higher for the index. The level of 17,500 was a resistance point; now that it has been taken out, all consolidation moves are expected to seek support at 17,500. If the extension of the move takes place with 17,500 as a potential support over the coming days, the possibility of the index testing a double-top resistance near 17,800 cannot be ruled out. This forms a higher trading range for the index between 17,500-17,800 levels over the coming days.
Monday’s session is likely to see the levels of 17,700 and 17,790 acting as potential resistance points while support will come in at 17,580 and 17,510 levels.
The Relative Strength Index (RSI) on the daily chart stood at 62.73; it has marked a new 14- period high which was bullish. The RSI continued to stay neutral as it did not show any divergence against price. The daily MACD was bullish and stayed above the Signal Line. Pattern analysis shows that after resisting 17,500 for several days, Nifty has finally attempted to break out of this consolidation zone. In the event of any consolidation, the level of 17,500, which was a resistance level earlier, is now expected to act as a support.
Current month’s Nifty futures OI has declined by over 3.63 lakh shares or 2.97%. The up move in Nifty coming with decrease in OI shows that the up move has been driven by short covering. For the up move to get extended, it would be important to see that further moves are led by fresh buying. Until that happens, sustainability of the moves on the higher side will be under question. So far, the technical setup stays buoyant; it is recommended that all moves on the downside should be used to make quality purchases. A cautiously positive approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])
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