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  • Milan Vaishnav, CMT, MSTA

Wednesday Trade Set-Up: Consolidation Might Persist Though Undercurrent Remains Intact

Much on the anticipated lines, the Markets continued to consolidate in a narrow range, and ended the day with a minor loss. After opening on a flat note, the NIFTY drifted in the negative territory in the morning trade. Though it continued to remain negative for the entire session, it came off from its morning lows and spent the rest of the session oscillating in a narrow range. The benchmark index NIFTY50 ended the day with a minor loss of 14.25 points (-0.13%).

NIFTY has spent the first two days of the week retracing from the 100-DMA and amid consolidation. As we approach Wednesday’s trade, we expect such similar consolidation to continue. We expect a tepid start to the trade and with 100-DMA continuing to act as overhead resistance for the Markets, andsee some more consolidation happening in the Markets with limited downsides.

The levels of 10890 and 10950 will continue to act as immediate resistance levels while supports will come in at 10830 and 10760 zones.

The Relative Strength Index (RSI) on the Daily Chart is 61.6072 and it stays neutral showing no divergence against the price. The Daily MACD is bullish and it trades above its signal line. A spinning top occurred on Candles. Such formations show indecisiveness of the market participants and often occurs amid the period of consolidation.

If we look at pattern analysis, NIFTY had ended outside the upper Bollinger band before couple of sessions. This often signals resumption of fresh uptrend or continuation of the present trend. However, at the same time, there was also some possibility of the NIFTY pulling back inside the band. This is what we are presently witnessing, and the Index continues to remain in the period of consolidation.

Given the present structure of the charts, we expect this consolidation to continue. However, F&O data suggests some fresh creation of shorts in the system as even the minor downsides are coming with net addition of open interest. We will continue to see NIFTY consolidating in a define range. We are also likely to see some volatility as well. It is suggested that the overall exposures should be kept modest while continuing to protect profits at higher levels. Shorts should be avoided as the undercurrent remains buoyant.

Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (MTA, USA / CSTA, Canada / STA, UK)|(Research Analyst, SEBI Reg. No. INH000003341)