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Global risk-on appetite continued to benefit the domestic stock market as NSE Nifty rose for a third straight session on Friday.
After opening on a positive note, the market saw very little volatility during the session.
The index finally ended near the high point of the day at 12,086.70, up 114.90 per cent or 0.96 per cent.
The market has registered gapup openings in the last two sessions, which show the strength in the rally.
Despite this, Nifty hasn’t achieved a breakout and has closed at the Double Top resistance level at 12,103, which makes 12,103-12,150 resistance zone difficult to negotiate.
The gaps too have occurred during a zone and are just area gaps and are less potent compared with breakaway gaps.
It would be prudent not to trade while anticipating a breakout, but to wait for it to actually happen and then look for confirmation.
The headline index is likely to make a flat start on Monday with 12,110 and 12,165 levels acting as resistance.
Supports may come in much lower at 12,000 and 11,970.
The Relative Strength Index (RSI) on the daily chart stood at 60 and was neutral against the price.
The daily MACD was bearish and traded below its signal price.
The Percentage Price Oscillator (PPO) remained negative.
A rising window emerged on the candles.
This is usually bullish, but these are just area gaps and are more potent if they occur along with a breakout or any directional move.
As per pattern analysis, Nifty has averted formation of a potentially weak setup, and has moved past the short-term 20-DMA at 11,995.
This makes the 12,000 level a key short-term support.
All in all, Nifty Put Call Ratio stands at 1.63.
The level is not overbought, but is very close to being one.
Keeping this in mind, along with the fact that the higher timeframe charts continue to diverge with the price negatively, it would be prudent if traders chase the momentum carefully.
Trades have no option, but to chase the momentum.
We would again advisers not to build excessive exposures while anticipating a breakout.
It would be wise to let the breakout actually happen and then follow the momentum, while simultaneously looking for confirmation as any adverse move can be damaging.
A cautious approach should be continued for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research - Advisory Services, Vadodara.
He can be reached at This email address is being protected from spambots.
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