Nifty consolidated with a positive bias on Wednesday after ending virtually flat with a gain of just 1 point or 0.01 per cent. However, as it has been happening, the 10,490-10,535 zones proved to be a strong resistance area for the Market.
The Index saw retracement and paring of gains after testing the high level of 10,503.60. There is a divergence in performance of Nifty even with strongly correlated Asian market like Hang Seng.
Given the kind of consolidation that the market is witnessing, and while referring the F&O data, we feel that it may consolidate, but with an upward bias. The levels of 10,490 and 10,535 will play out once again as immediate resistance area for the market. Supports came in at 10,410 and 10,375 zones.
The Relative Strength Index (RSI) on the daily chart is 55.7909 and it continues to stay neutral against the price showing no divergences. The daily MACD stays bullish, while trading above its signal line.
A small black body occurred on the candles. However, this remains insignificant given the present formation.
The pattern analysis show that the Nifty has continued to resist to the 10,490-10,535 zones for couple of times now. It makes one thing pretty evident that that for an upmove to occur and sustain, market will have to move past this resistance area.
Overall, looking at the high correlation that the Nifty enjoys with Hang Seng Index among Asian peers, and the fact that Hang Seng Index has already broken out from its lifetime highs, it makes highly probable that the Nifty may not correct much.
There are high probabilities that the Nifty may just continue to consolidate for some more time, but finally resumes its upmove. However, until the resistance area of 10,490-10,535 is breached on the upside, positively cautious approach is advised for the day.
STOCKS TO WATCH:
Fresh long positions were seen building up in Ashok Leyland, Bosch, Eicher Motors, Cummins, TCS, HCL Technologies, Pidilite Industries and CEAT.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
