Trade Setup: Market may continue to be range-bound in immediate near-term

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Consolidation continued in the Indian markets for the fourth day as the markets oscillated in a limited range before closing with minor gains. After a modestly negative start to the session, Nifty crawled back to positive territory in the first hour of the trade. It traded in a range until afternoon; in the second half, the index kept moving in a very limited and defined range in the negative territory without showing any major weakness. It again went in the positive territory following a pullback. The headlines index closed with a small gain of 15.75 points (+0.09%).

Monday will see the markets opening following a long weekend; Friday was a trading holiday on account of observance of Ganesh Chaturthi. While the SGX Nifty had gained on Thursday, it closed negative on Friday. The Nifty will open while adjusting to such trade setup. With the global market setup being neutral to mildly negative, Nifty is likely to open on a tepid note and look for directions. The options data suggests that the upsides may stay capped at higher levels; the markets may continue remaining largely range-bound in the immediate near-term.

Volatility came down as INDIAVIX dipped by 3.24% to 13.9425. The levels of 17400 and 17465 may act as immediate resistance points; the supports will come in at 17300 and 17235.

The Relative Strength Index (RSI) on the daily chart is 81.87; it remains in overbought zone. RSI also remains neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line. A small white body emerged on the candles. Apart from this, no other formations were observed on the charts.

The pattern analysis shows that the the breakout that took place above 15900-15950 levels remain very much in place. Nifty has risen, consolidating its advance in between, and have continued rising again. While making basing points after each incremental increase, the NIFTY has managed to dragged their near-term supports higher.

Overall, the markets are showing some signs of fatigue; however, it should also be noted that it is not showing any signs of major weakness. The present technical setup indicates that the markets may remain range bound and may consolidate a bit in a broadly defined range. This is likely to keep the markes stock-specific in nature. The fresh up move shall occur only if the Nifty moves above 17450-17500 zone in a convincing manner. Until this happens, the index will continue to consolidate. There are possibilities of profit taking bouts at higher levels. We recommend avoiding shorts, staying highly selective while making fresh purchases and protect profits at higher levels.

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