The domestic stock market extended their winning run into the third straight session to hit fresh record closing high on Thursday. NSE Nifty opened in the red, but crawled back into the positive zone as the session progressed. The index finally ended with a gain of 38.05 points or 0.31 per cent at 12,259.70.
The session was predominantly guided by the expiry of weekly options. The 12,200 strike saw the highest Put open interest builtup for the whole session, which didn’t allow Nifty to slip below this level. On the other hand, the maximum Call OI above this strike kept the market extremely rangebound.
Dalal Street is showing signs of fatigue at current levels and lacks strength at this juncture of a breakout. It is highly likely that the market may halt its rally and consolidate now.
With the market in the uncharted territory, Friday’s session may see a soft start, with 12,300 and 12,330 levels acting as resistance. Support may come in lower at 12,190 and 12,145.
The Relative Strength Index (RSI) on the daily chart stood at 66.95 and continued to show bearish divergence against the price. The daily MACD was bullish and traded above its signal line. Apart from a white body that emerged on the candles, no other significant formations were seen.
As per pattern analysis, Nifty has broken above the 12,103 level, which was a major Double Top resistance. However, with the index trading above this zone, the level has now become immediate support.
While the market is in a structurally sound technical setup, Nifty is overbought on a couple of short-term indicators. The lead indicators are also exhibiting fatigue and lack strength along with weak market breadth.
The breakout will remain in force as long as the index trades above 12,100, but there are higher chances of consolidation at the current levels.
We would again advise traders to protect profits at higher levels.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])
Source: Economic Times