Thursday Trade Set-up: Use Up-moves To Protect Profits While Keeping Exposures At Modest Levels
Wednesday’s trade continued to see the markets stacking up some gains as it ended yet another day with gains. After opening on a quiet note, the NIFTY furthered its advances. However, even though the index managed to keep its head above the key levels, the session remained quite range bound, and the markets visibly lacked the strength and conviction that is usually required for a lasting breakout. The NIFTY oscillated back and forth within a defined range and finally ended the day with gains of 65.55 points or 0.60%.
We can expect a flat start to the trade on Thursday. The Markets may attempt to post modest gains in the initial trade, but it is showing all signs of consolidation creeping in from higher levels. Markets are lacking the conviction and support of the market breadth that is required to take it past its immediate past high of 11118.
Thursday is likely to see the level of 11090 and 11140 to act as resistance points. Supports come in at 10990 and 10910 levels.
The Relative Strength Index (RSI) on the daily chart is 63.6509. It has marked a fresh 14-period high but does not show any divergence against the price. The daily MACD stays bullish and trades above its signal line; its trajectory, however, appears to be very flat. A Rising Window occurred on Candles. Such formations usually mean continuation of upside, but it requires confirmation on the next trading day. More so in the present context as the overall volume remained relatively on the lower side.
The pattern analysis shows that NIFTY has moved past the multi-month resistance area of 10960-10990. However, while moving past this resistance line, the markets have lacked the breadth and has not moved past in a convincing manner.
Given the present structure on the charts, the possibilities exist that the NIFTY face some consolidation at higher levels. Some corrective moves from higher levels with the level of 200-DMA acting as support cannot be ruled out. We strongly suggest maintaining caution at higher levels. Chasing the momentum blindly should be avoided and all up moves should be utilized to protect profits at higher levels. A cautious outlook is maintained for tomorrow.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)