Nifty continues to consolidate after a spectacular rise...What is next?

Bottom Line: Nifty has failed to generate positive momentum after Gap up opening. Close above 7600 level is essential now to continue the up move.

Nifty daily chart:

Nifty 60 mins chart:

Wave analysis:

In last session, Nifty had Gap up opening at 7540 level and moved higher towards 7583, however post that prices were unable to garner the upside momentum and closed near 7540 levels.

Over past few days we witnessed that after breaking above the previous high Nifty is reversing back on downside thereby keeping the overall trend in a range. Prices have tried to fill the Gap area in last session which is not very promising signal, however just one day of action is not a good idea to judge the overall trend and price action from current levels will be crucial to see.

As shown in daily chart, Nifty formed a DOJI pattern in the previous session. The psychology behind the pattern suggests that there can be halt in the up move and closing above the high of this candle becomes important for resumption of up move.

Short term topping cycle of 49 days is due today and it is therefore important to stay alert in case there are exhaustion signs. Strong momentum above 7600 will indicate delay in the topping cycle but break below previous weekly low near 7424 will result into the downside retracement and turn the short term trend negative.

As shown in 60 mins chart, prices have continued to move in non trending environment from last 6 days. The red channel resistance is close to the previous high and crossing above this trendline is crucial. Failure to do that over next 2 days will be a warning sign. For now let us keep a close eye on important support levels. Existing longs can continue to trail stop towards 7420 level.

In short, Nifty is moving in consolidation. Close above 7600 is required to continue the up move however any break of 7420 followed by 7350 can start retracement of the recent rally.

Strategy for the day: For today, long positions can be created if Nifty moves above 7580 with 7520 as stop and target of 7640. Short positions can be created below 7460 levels with day high as stop and target of 7420.

                Note: Levels mentioned in this report is as per Cash (Spot) market

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