Market outlook: Nifty needs to take out 10,410 level for the next leg of rally

Very much on the expected lines, the equity market spent the Wednesday’s session in a much defined range while the benchmark Nifty50 ended the day with a net loss of 8.95 points or 0.09 per cent.

We enter the expiry day on Thursday and we will see the session continuing to remain heavily dominated with roller centric activities. Important thing to note that the Index has struggled for several days in the 10,365-10,410 zones, and have not sustained those levels.

In all probability, until the level of 10410 is breached on the upside, this level of 10,410 will now act as an intermediate top and an important resistance.
The levels of 10,410 and 10,445 will play out as important resistance levels for Thursday. Supports come in much lower at 10,305 and 10,250.



The Relative Strength Index (RSI) on the daily chart is 57.4833 and it stays neutral showing no divergence against the price.

The daily MACD is bullish as it trades above its signal line but may report a negative crossover again in event of some weakness.

Spinning Tops continued to recur on candles, which emphasises indecisiveness on part of participants. The pattern analysis does not paint a pretty picture.

With the Index resisting the levels of 10,410 and failing to clear it comprehensively marks, it as a potential intermediate short-term top.

On the other hand, the RSI, which is a lead indicator too has formed a lower top and is seen inching downwards.

Overall, it is fairly clear from the technical structure of the chart and the lead indicators that the upsides in the markets will continue to remain vulnerable to profit taking bouts.

We recommend remaining much light on the overall exposure and keep it moderate. Profits should be protected very vigilantly at higher levels.

There are chances that the session may remain volatile owing to expiry of the current derivative series. It is advised to continue maintaining a cautious view on the market, as the upsides may remain capped unless the 10,410 is breached on the upside. Out-performance is likely to remain limited to certain select pockets.

STOCKS TO WATCH: Shorts were seen being piled up on counters like Suzlon, Federal Bank, Tata Motors, PFC, Ashok Leyland, BHEL and Yes Bank. Stock like L&T Housing Finance, NBCC, CDSL, Godrej Properties, Bata and Sical Logistics may trade with positive bias.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)