What seemed a likely confirmation of a breakout attempt, turned out be a big disappointment, as the market witnessed bouts of profit-taking at higher levels in the last hour of the trade.

The Nifty pared all of its gains and finally settled the day with a net loss of 40.75 points or 0.39 per cent. What was technically significant in the Wednesday's trade was that the Nifty has still not yet confirmed its breakout attempt.

Going into trade on Thursday, the levels of 10,490 shall remain critically important for the market. Nifty will have to move past and trade above 10,490 levels to avoid any weakness. Any slip below this level will see the market being forced into some more corrective consolidation.

The levels of 10,535 and 10,580 will play out as resistance levels, while the supports will come in at 10,440 and 10,405 zones.

The Relative Strength Index (RSI) on the daily chart is 61.7832, and it remains neutral showing no divergence against the price. The daily MACD stays bullish while still trading above its signal line.

A black body emerged on the candles. But it remains insignificant in the present scenario. The pattern analysis clearly shows lack of confirmation of the attempted breakout.

The Nifty has taken support on the same value i.e. 10,490, which is the level, it attempted to breach on the upside. This level remains important and might dictate the movement of Nifty over the coming days.

We also enter the expiry day of the current derivative series, and we will continue to see the session remaining dominated with rollover centric activities.

Unless the Nifty moves past the level of 10,490 in a comprehensive manner, it will continue to remain susceptible to volatile profit taking bouts at higher levels. While continuing to keep exposures at very modest levels, highly cautious view is advised for the day.

STOCKS TO WATCH: Short positions were seen building in stocks like South Indian Bank, IDFC Bank, TV18 Broadcast, ITC, Ashok Leyland, Tata Motors and Federal Bank. Long unwinding was observed on counters like India Cements, Tata Power, BHEL, PNB and DLF.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)