After just a day or so of consolidation, the NIFTY resumed its up move on Wednesday and closed the day with yet another lifetime high. The benchmark Index ended the day gaining 60.55 points or 0.53%. Any consolidation that the Markets are witnessing are just intraday and the NIFTY is continuing to surge higher at Close levels.
As we approach Thursday’s trade, we again stare at a likely continuation of the up move. However, at this juncture, what we cannot ignore is the overbought nature of the Markets. Also, what we cannot overlook is the fact that the Markets continue to remain overstretched on the Daily Charts along with being overbought. Despite the likely up move, NIFTY continues to face high probabilities of minor but imminent corrective moves from higher levels.
Thursday will see the levels of 11465 and 11530 playing out as immediate resistance levels. Supports come in much lower at 11410 and 11330 zones.
The Relative Strength Index – RSI on the Daily Chart is 73.6891. Despite the up move, the RSI has continued to mark a Bearish Divergence on the Charts as the NIFTY has once again marked a 14-period high while RSI has not. Daily MACD stays bullish while trading above the signal line.
If we look the pattern analysis, the NIFTY has continued with its up-move post breaking out above the 11170-11175 zones. Presently it trades overbought and remains vulnerable to corrective moves from higher levels as it stares at imminent consolidation.
Overall, NIFTY continues to display strength on the Charts and the primary uptrend continues to remain intact and buoyant. But with each move higher while the Markets are overbought, the chasing of the momentum is getting riskier. We recommend exercising highest degree of caution while approaching markets from hereon. Traders should vigilantly keep trailing their stop losses and avoid blind chase to the momentum. Even if the corrective moves are minor and the downsides limited, the moves are likely to be accompanied with volatility. Remaining very light on positions while adopting a cautious view on the Markets is advised for the day.
STOCKS TO WATCH:
Shorts were seen being built in stocks like IDFC Bank, NMDC, LUPIN, SAIL, L&TFH, RECLTD, ARVIND, VEDL, AUROPHARMA, ITC, HIND PETRO, TATA POWER, INFOSYS and TVS MOTOR.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst