Trade setup: Nifty may consolidate now; watch out for 10,850 levelJune 14, 2018
Indian equity market has entered a prolonged consolidation phase, as the NSE benchmark Nifty slipped below the 10,850 level on Thursday.
Though the market saw decent recovery from the low point of the day, the Nifty still ended 48.65 points or 0.45 per cent lower.
Nifty futures turned into a premium, as the index saw good recovery from the low point of the day. There was a clear indication that short covering happened from the lows of the day.
As we approach Friday’s session, we expect a rangebound trade and 10,850 continuing to be a critical level, which may pose formidable resistance to the Nifty.
The session will see the levels of 10,850 and 10,885 acting as immediate resistance area. Supports may come in at 10,765 and 10,740 levels.
The Relative Strength Index (RSI) on the daily chart was 58.7918. It remained neutral and showed no divergence against the price. The daily MACD stayed bullish while trading above its signal line. A falling window occurred on the candles. It was relatively a small candle, but since it showed a gap and emerged near the pattern resistance, it cannot be ignored. It can potentially stall any further upmove for some time.
Pattern analysis showed that the Nifty failed to clear the falling trend line pattern resistance. This falling trend line started from the level of 11,171, and subsequently joined the lower tops.
Overall, the market continued to remain in a tentative mood, and as of now, the zones of 10,820-10,850 pose important pattern resistance.
Also, as per FO data, Nifty might see short covering again from lower levels. All this point towards a rangebound session, however, it is evident and clear that no upmove shall occur unless the Nifty moves past 10,850-mark.
We recommend remaining light on positions and continue to protect profits higher levels. The oscillations in the Nifty will remain rangebound unless market takes a directional call beyond the 10,820-10,850 zones.
Cautious view on the market is advised for the day.
STOCKS TO WATCH: Long positions were added in stocks of Reliance, Bharti Airtel, CG Power, Tata Steel, Ashok Leyland, Adani Power, Tata Global, YES Bank, Glenmark Pharma, Dish TV, Oil India and Kotak Bank.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research Advisory Services, Vadodara. He can be reached at email@example.com)