Trade setup: Nifty still not out of the woods; 10\,650 level remains key

In a capped, but volatile session on Friday, the NSE benchmark Nifty attempted to move out and keep its head above the 10,600-10,650 zone.

After opening on a positive note, the Nifty marked its intraday high of 10,695 in the late morning session.

Thereafter, Nifty spent the entire day in a 40-point range, while making no major headway. Though no significant upsides were seen, the market stayed above the 10,650 mark and ended with a gain of 65.50 points or 0.62 per cent.

We enter once again into a truncated week with Friday being a trading holiday. The market remains at an important juncture. If Nifty can extend its upmove, we will then see the index approaching the 10,750-10,755 zone, which is the confluence area of different resistance points.

We expect a stable start to the trade on Monday and the behavior of Nifty vis-à-vis the level of 10,650 will be important to watch. Any slip below 10,650 will again see the Nifty being pushed into consolidation again. The zones of 10,600-10,650 continues to remain important.

Monday is likely to see the levels of 10,730 and 10,760 acting as immediate resistance area. Supports may come in at 10,610 and 10,550.

The Relative Strength Index (RSI) on the daily chart stood at 56.5863 and it has marked a fresh 14-period high, which is bullish. The Daily MACD is bullish while trading above its signal line.

Pattern analysis suggested that as Nifty has moved above the 10,650-mark, along with this, it has also attempted to move beyond the falling trend line resistance.

If Nifty can extend its upmove, it will then see itself approaching the the 200-DMA, which is at 10754. This is also the area, which is the confluence point of 50-DMA, which is at 10,750.

So, an extension of the upmove, if any, will see the Nifty approaching this multiple resistance points going ahead. Any move below the 10,600-10,650 mark will push the market into consolidation again.

We recommend continuing with protecting profits at higher levels while maintaining a cautious view on the market. Highly selective approach is advised for the day.

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