The bulls came back strongly in yesterday’s session after a round of sharp profit taking on Monday and carried the Nifty back above the 5100 mark. Tracking weak cues from global markets, Nifty opened on a softer note but started to recover higher and managed to build gains throughout the session to close near the high of the day. As a result it has formed a ‘bullish engulfing’ candlestick pattern on the daily chart that suggests further gains in the coming session. Volumes continue to clock at an average rate and the market breadth was once again in favour of advances. Momentum oscillators are developing negative divergence on hourly chart i.e. price gain is not confirmed by the oscillators and the daily indicator (Stochastic) is trading in overbought zone suggesting that the index is vulnerable to sudden profit sales pressure. From the current levels we suggest taking a cautious stance as the upside on the index is limited to 5150 / 5180 and one can see a retracement down to 4990 / 4950 levels in the short-term. It is recommended to take profits on trading longs at higher levels.
Among the notable sectoral performances, with the exception of Healthcare index (-0.40%), all other indexes ended the day in the green. Gains were led by interest rate sensitive Realty (+2.01%), Banking (+1.90%) and Cap Goods (+1.84%). The broader markets continued to underperform their frontline benchmark with 0.62% gain for Mid-cap index and 0.28% gain for the Small-cap index.
Bullish Setups: CNXBANK, REC, HUVR, BPCL
Bearish Setups: DRRD, LICHF, INFO, HDFC, ACEM
Regards,
Edelweiss Research
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