Benchmark remains sideways, midcap index shows negative divergence at record highs: Angel Broking

Daily Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):

"It was yet another day of consolidation for our markets as we saw index replicating previous day's price action with a smaller trading range. Eventually, the Nifty ended the session with a negligible cut below the 10450 mark.

Post the key events unfolding, we are not seeing any major price action in the benchmark index; but, the real interest lies outside the index as we are seeing selective individual stocks soaring to a great extent. Since last couple of days, we have been stating a trading range of 10372 - 10490 for the Nifty and only a sustainable breakout on either side would trigger some momentum in the index. Hence, our strategy has been to focus on stock centric moves from the midcap basket. This approach played out well as the 'Nifty Midcap' index hasten to record highs by clocking nearly 6% move in last 3-4 days.

The midcap index hitting new highs is obviously an encouraging sign for the traders and we advised participating in it. But, now, we do not want to be in such bandwagon as we are seeing some cautionary signs on charts. The daily chart exhibits a 'Wolfe Wave' and as per the requirement, the 5th point has been met at the 161% retracement level of the recent down move. The said structure is considered as a contrarian play and thus, sometimes it works on assumptions. But, to add weightage to this hypothesis, we can also see a '3-point Negative Divergence' in 'RSI-Smoothened' oscillator. Hence, we advise traders to start booking profits in the midcap space and follow strict stop losses for existing positions."

Source : Equity Bulls

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