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Market outlook: Nifty to soon test 10,690 level; avoid shorts and pick select stocks

Tuesday is likely to see a positive opening, and the market may extend its gains.

, ET CONTRIBUTORS|
Jan 08, 2018, 08.13 PM IST
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Tuesday is likely to see a positive opening, and the market may extend its gains.
The benchmark Nifty50 confirmed its breakout after attempting to move past the 10,490-10,535 zone, as it continued to inch higher and closed the day with a net gain of 64.75 points or 0.61 per cent.

Given the present setup on the charts, despite some brief consolidation, the markets is steadily headed towards the 10,650-10,690 levels over the coming days.

Tuesday is likely to see a positive opening, and the market may extend its gains, at least in the early part of the trade.

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The levels of 10,650 and 10,695 will act as immediate area of resistance. Supports come in at 10,590 and 10,565 zones.

The Relative Strength Index (RSI) on the daily chart is 66.8519, and it has marked a fresh 14-period high, which is bullish.

The daily MACD stays bullish, while trading above its signal line. On candles, yet another Rising Window occurred. There are eight Rising Windows in last 50 candles, and this makes the current Rising Window even more bullish.

The pattern analysis confirms a breakout above the 10,490-10,535 resistance area. The momentum is likely to persist as the market has formed a continuation gap as it advanced higher with the breakout.

Overall, we expect the buoyant intent of the market to persist for some more time. Though some consolidation at around 10,690 levels cannot be ruled out, the overall upward momentum is likely to remain steadily bullish.

We expect the market to test these levels and beyond, while it is expected to resist to 24-month long trend line on the weekly charts. We reiterate completely avoiding shorts and continue making select purchases while vigilantly watching profits at higher levels. Positive outlook is advised for the day.

STOCKS TO WATCH: Buoyant technical set up is observed in stocks like Bombay Rayon, Federal Bank, CGPOWER, BPCL, IOC, Infosys, Vijaya Bank, Indiabulls Housing Finance and V-Guard Industries.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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