Where are We? The current chart pattern indicates further upside potential for the next few sessions, but there is a possibility of emergence of selling interest from near the highs of 11,850-11,900 levels in the next 1-2 weeks. Daily 14 period RSI is currently placed around the hurdle of 60. We observe multiple negative divergence pattern in the Nifty/RSI as per the daily chart. This could mean a weak upside strength at the new highs.
What is in Store? A small positive candle was formed this week with long lower shadow. Technically, this pattern could indicate a ‘high wave’ type candle pattern at the highs. But, having moved in a range over the last few weeks, the predictive value of this pattern could be less significant. The overall weekly chart pattern indicates possibility of broader sideways range movement in the Nifty between 11,900 and 11,550 levels over the next 3-4 weeks, before showing decisive range breakout on either side.
What could an Investor Do? The near-term trend of Nifty is positive within a broader range bound action. One may expect further gradual upmove towards 11,850-11,900 levels in this short week (3-day week, due to market holidays), before showing next round of downward correction from the new highs. One may continue with short-term trading positions; weakness from higher levels could give an opportunity to buy on small dips in the next few weeks. Sectorally, banking, IT, energy and metals are expected to outperform. Automobile and realty are expected to underperform in the next few weeks.