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Trade setup: Stay cautious, Nifty won’t see sustain rise unless it moves past 11,450


Despite a stronger-than-expected start to Monday’s trade, Indian equities failed to sustain at higher levels and came off from the day’s high before ending with mild gains.

Nifty saw a stable opening and after a minor blip in the morning, it remained in the positive territory for most of the day. The market traded in a capped range while maintaining modest gains. It grew stronger in late afternoon trade. However, in the last hour and a half, the market gave in to profit-taking and came off nearly 90-odd points from the day’s high.

Nifty ended the day posting a modest gain of 36.10 points, or 0.32 per cent.

As evident from the charts, Nifty faced pattern resistance of the falling trend-line and also ar the 100-DMA, which is currently at 11,408. Nifty is grappling with a weak technical setup, and in the current context, the 200-DMA has become a very crucial level to watch over the coming days. Any breach of this level, which is 11,273 at present, will see Nifty extend its downside.

On Tuesday, Nifty is likely to see a tepid start to trade. The 11,400 and 11,435 levels will act as key resistance, while supports will come in at 11,270 and 11,210. In the event of any downside, the trading range is expected to remain broader than usual.

Nifty snip 10

The RSI on the daily chart stands at 54.19; it remains neutral and does not show any divergence against price. The daily MACD is bearish, and it trades below the signal line. A Spinning Top occurred on the candles. The formation of a Spinning Top has a very small real body and signals lack of conviction and indecisive behaviour of the market participants.

From pattern analysis, it appears that Nifty has given up 50% of its most recent pullback, and it is now consolidating in a defined range. It has faced resistance at the 100- DMA and is struggling to keep its head well above the 200-DMA at 11,273.

Nifty will not have any sustainable up-move unless it moves past the 11,450 level convincingly and closes above that mark. On the other hand, staying above the 200-DMA will be critically important for Nifty. Otherwise, it is bound to get much weaker than now. We reiterate not chasing any up-moves as Nifty remains prone to bouts of profit taking from higher levels. We recommend avoiding any significant exposure to the market until a firm directional bias is established. Continue to approach the market on a highly cautious note.

(Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)





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