The benchmark indices closed on a strong note ahead of US bank stress test results. Positive global cues were also supportive, most Asian indices ended higher 2-4% and European markets also opened positive. The Sensex closed 164 points or 1.37% higher at 12,116 and the Nifty shut at 3684 up 1.62% or 59 points. Among the broader indices - the BSE Midcap Index was up 101 points or 2.75% and the Smallcap Index rose 2.66% or 110 points.

The market breadth was quite strong but the volumes were lower then yesterday's session. Buying interest was witnessed in metals, financial, reality and telecom stocks while FMCG and select IT stocks remained under pressure.

The market trend is quite strong as the undertone is bullish. The bulls are still holding the momentum on the higher side but if we look at the three day pattern, the trading band is getting very narrow. The range which is developed in nifty is 3615-3715. And if this trading band is broken on the either side a fresh breakout emerges. So wait for the clear trend to emerge.

The technical oscillator RSI on the nifty daily chart is at 71, which is indicating that the market is highly overbought. Now going forward one should be cautious in building positions as the markets are quite overstretched. This intermediate trend will be under threat only if nifty breaks 3400.

For intra-day support is placed at 3615 and resistance at 3715. Wait for the fresh breakout to emerge and then take call. Traders need to remain extremely cautious and keep strict trailing stop loss on all long positions as markets will remain extremely volatile in coming days.