A big gush of liquidity continued to chase global equities and Indian stocks were no exception. As a part of a risk-on setup that developed over the past couple of days, domestic equities opened with a gap up and extended Friday’s gains. Nifty opened strong and headed higher as the session progressed and, at one point in time, kissed the most important pattern resistance that existed in form of a decade-old rising trend line.

Some minor profit taking was seen, as Nifty came off nearly 100 points from the high point of the day and closed with a net gain of 245.85 points, or 2.57 per cent.

Including Monday’s rise, Nifty has risen nearly 800 points in four consecutive sessions. The risk-reward ratio in this market has become extremely skewed. Also, the Index has shown signs of halting its up-move near the crucial resistance point. Given this reading, there are higher chances of the market seeing some consolidation or mild profit taking amid the risk-on environment still in place.

In Tuesday’s session. the 9,890 and 9,930 levels are likely to act as strong resistance points for Nifty, while supports will come in at 9,745 and 9,610 levels.

The Relative Strength Index (RSI) on the daily chart stood at 63.41; it has marked a fresh 14-period high, which is a bullish sign. The RSI, however, remains neutral and does not show any divergence against the price. The daily MACD remains bullish and it trades above the signal line.

ET CONTRIBUTORS

On candles, a Rising Window has occurred. Such a candle usually results out of a gapup start. The potency of this candle may not be as much as it has appeared near a strong resistance point. For this candle to be valid, we will need a confirmation in the next trading session.

All in all, despite the strong liquidity-driven push, Nifty has not yet reversed its trend. It has tested a serious decade-old pattern resistance level that it violated during the recent downtrend. Unless Nifty penetrates this rising trend line pattern resistance, the uptrend is likely to get disrupted. We reiterate using all future up-moves to protect profits at higher levels and approaching the market with a high degree of caution until it consolidates its current up-move.

(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])

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