What Markets witnessed in Tuesday’s trade was a classical consolidation and stalling of the up move which the Markets have witnessed over previous days. The session witnessed a very range bound trade wherein the NIFTY made no major headway and ended the day on a flat note gaining a negligible 2.35 points or 0.02%.
Wednesday is likely to see a quiet opening to the trade and we expect the NIFTY to remain in a range and not achieve any major meaningful up move. We expect a range bound consolidation to continue and even few minor corrective moves on lower volumes should not surprise us.
Wednesday will continue to see the levels of 11420 and 11455 acting as resistance area for the Markets. Supports will come in lower at 11330 and 10250 zones.
The Relative Strength Index – RSI on the Daily Chart is 71.2622 and it continues to trade mildly in the overbought area. A bearish divergence also continues to persist as the NIFTY has made a fresh 14-period high while the RSI did not. Daily MACD continues to remain bullish while trading above its signal line. Apart from a small black body that emerged on candles, no significant formations were observed.
Overall, the NIFTY is likely to see consolidation persisting for some more time. As mentioned earlier, few corrective moves, though range bound, too cannot be ruled out. The Bollinger bands which are currently over 30% wider-than-normal are gradually widening. Though this does not suggest anything conclusive about the future volatility, NIFTY is likely to remain in a capped range with limited upside so long as it is overbought and slightly overstretched in structure.
We are expected to see stock and sector specific activities and might see the sectors and stocks which have lagged the Markets over previous months continue to see some buying. Apart from this, we do not expect any one-way significant up move. It would be healthy for the Markets to continue to consolidate for some more time before it resumes its up move again. We recommend adopting a highly stock specific view while maintaining a cautious view on the Markets for the day.
STOCKS TO WATCH:
In the derivative segment, Contracts of SAIL, State Bank, Suzlon, ICICI Bank, Hindalco, Bank of Baroda, Adani Power, Axis Bank, Adani Ports, Motherson Sumi, Vedanta, Ashok Leyland and Tata Steel remained one of the most active contracts.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst