Market May Enter Consolidation Mode

The upside is mostly capped for now as it met the pattern targets. If the index continues to rally, it may face stiff resistance around the 26,500 zone. On the downside, the nearest support is at 25900. Below this, the 25,695 and 25,515 levels will act as supports

The equities traded subdued on the weekend. NSE Nifty declined by 37.10 points or 0.14 per cent and closed at 26,178.95 points. The Oil and Gas index gained the most by 2.37 per cent, followed by the PSE index with 1.51 per cent. Healthcare, Commodity, and Pharma indices are up by over a per cent. The Realty index is the top loser with 1.19 per cent. The PSU Bank index is down by 1.03 per cent, and Bank Nifty declined by one per cent. The India VIX has slipped to 11.96. The market breadth is slightly positive as 1,418 advances and 1,390 declines. About 164 stocks hit a new 52-week high, and 105 stocks traded in the upper circuit. Trent, BEL, Divi’s Lab, and LTIM were toppingthe trading counters in terms of value.

On the weekend, the Nifty closed flat to negative with the profit booking in the banking stock. The higher volume indicates big selling. As the decline is less than 0.20 per cent, the index escaped the distribution day. The volumes were higher in the last five days. The Nifty opened at a new record high at 26,277.35 points, but was not sustained at higher levels. After the first hour of trading, the index witnessed a selling pressure. It formed lower highs on an hourly chart. It closed at near day’s low. The index finally goes back into the Bollinger bands, which is expected. The RSI reacted from the 80 zone. The Nifty formed three successive strong bullish bars on the weekly chart. It gained 388 points in the week and 1,377 points or 5.55 per cent in the last three weeks. The momentum has slightly declined. The upside is mostly capped for now as it met the pattern targets. If the index continues to rally, it may face stiff resistance around the 26,500 zone. On the downside, the nearest support is at 8EMA of 25,900 points. Below this, the 25,695 and 25,515 levels act as supports. The 20DMA is at 25453. We can’t project more than this now. In the next two weeks, the market may consolidate to take a directional move. Mostly the consolidation will be 25,500- 26,500 zone. The earnings will begin in the next two weeks and will influence the price action. Till then, be with the stronger stocks and manage the risk.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)