On the RBI monetary policy day, the Nifty opened higher but soon witnessed profit booking and remained under pressure for much of the session. However, buying interest emerged in the latter half, helping the index recover from its intraday lows. The recently introduced Closing Auction Session (CAS) once again triggered a uptick in the final minutes, enabling the Nifty to erase its losses and end Wednesday marginally in the green above the 24,620 mark.
Inside Candle Points to Near-Term Consolidation
The day's price action was similar to the previous session, with the Nifty forming a small bearish body accompanied by a long lower shadow. However, Wednesday's entire trading range remained within Tuesday's high and low, resulting in the formation of an inside candle.
Despite the recent consolidation, the broader technical structure remains constructive. The Nifty continues to trade above its key support levels and is holding above the April swing high of 24,602. After an eight-session upswing, the index has entered a consolidation phase, in line with our earlier expectations.
This counter-trend consolidation could continue for another couple of sessions. Such pullbacks often extend towards the 38.2% retracement of the preceding upswing, which is currently placed near 24,328. If selling pressure intensifies, the index could move towards the 50% retracement level of 24,190. The 20-DMA, currently around 24,196, also lies in the same zone, making it an important support area.
200-DMA Remains the Key Hurdle
On the upside, immediate resistance is placed at 24,703.90, Tuesday's open-high level. A decisive move above this mark could bring the 200-DMA, currently placed near 24,770, into focus.
A sustained close above the 200-DMA would strengthen the bullish setup and could pave the way for an advance towards the 24,880-24,990 zone.
Momentum indicators continue to support a positive view, while both broader market breadth and index breadth remain healthy. Mid-cap and small-cap stocks are also continuing to outperform the benchmark.
For now, the bias remains positive as long as the Nifty holds above 24,428. With the benchmark consolidating near key resistance levels, the focus should remain on stock-specific opportunities.
Stock to Watch: Shriram Finance
Shriram Finance has broken out of a 23-week consolidation and closed at a fresh lifetime high. The price structure also resembles a cup-and-handle formation (not a perfect text book pattern), adding strength to the breakout setup.
The Relative Strength line has moved to a new high, indicating that the stock continues to outperform the broader market. The breakout was also supported by higher volumes, reflecting strong buying interest.
From a trend perspective, the stock remains firmly placed above its key short- and long-term moving averages, with the averages themselves maintaining an upward slope. The Bollinger Bands are expanding, while the moving average ribbon continues to trend higher, suggesting that momentum remains strong.
Momentum indicators also support the positive setup. The MACD has generated a fresh bullish crossover, while the 14-period RSI remains in bullish territory on both the daily and weekly time frames. The Stochastic RSI continues to favour the bulls, and the KST is approaching a bullish crossover. The Elder Impulse System has also formed a strong bullish bar.
Overall, the stock has confirmed a bullish breakout from a prolonged consolidation phase. A sustained move above Rs 1,116 could open the way towards Rs 1,190-1,220. Traders may maintain a stop-loss at Rs 1,072.
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