Nifty: Trade Setup: Nifty50 remains in consolidation; holding 18k level key for further upside

In a listless and lacklustre day for the Indian equities, the market consolidated for the entire day and spent the session in a sideways trajectory. Nifty50 opened on a modestly positive note; it got a little stronger and marked the intraday high point in the early minutes of the trade. After that, the headline index slipped in the negative territory. The markets took no directional cue after that and continued oscillating in a limited range. After failing to establish any trend, and after rebounding a bit from the lower levels, the benchmark index ended the day with a net loss of 24.30 points (-0.13 per cent).

Tuesday’s session was right on the anticipated lines. The midcap universe grossly outperformed the frontline Nifty50; this trend is likely to continue throughout this week and we will see the midcaps and overall broader markets continuing to relatively outperform the front line indices. Some Call writing was seen at 18100 and 18200 strikes; the level of 18200 saw the highest Call OI accumulation which makes this an immediate resistance point for the markets. Highest Put OI exists at 17900-level. For the markets to resume their up move and get stronger, staying above the 18000-mark is important.

On Wednesday, 18100 and 18165 levels are likely to act as immediate resistance points. The supports come in at 18000 and 17930.

The Relative Strength Index (RSI) is at 54.44; it is neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line. No major formations were noticed on the candles except a modestly sized bearish candle with a relatively long lower shadow.

The pattern analysis shows that Nifty50 is now above the falling trendline resistance. This trendline starts from the high point of 18600 and subsequently joins the lower high of 18350. Given the falling nature of this trendline, Nifty50 is now above this; in fact, it took the support at this trendline and staged a modest recovery after that.
All in all, the analysis for Wednesday remains much on similar lines. So long as Nifty50 is able to keep its head above the 18000-level, there are greater possibilities of the market piling up some more gains and extending its up move. However, any slip below the 18000-level will keep the markets under some ranged consolidation. The broader markets are expected to continue their relative outperformance over the frontline indices. We recommend avoiding excessive leveraged exposures and continue to approach the markets on a highly selective note.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)