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Monday Trade Setup: Soft Start To The Day Likely; NIFTY Likely To Stay Ranged

It was a range-bound day for the markets as the NIFTY oscillated in a 100-point range throughout the day before ending the a yet another day with gains. The markets saw a resilient opening and opened near the high point of the day. However, it soon pared most of its opening gains and spent the remaining session in recouping those lost gains. By the end of the session, the NIFTY managed to reach close to its high point. The headline index finally ended the day with net gains of 94.10 points (+0.91%).
 
 

The markets are currently in a perfectly dicey situation. The Friday has seen an overnight weakness in the global stock. This might result in a negative opening for the Indian markets on Monday. Having said this, the up move in NIFTY on Friday has come with a very decent increase in Net Open Interest in NIFTY futures which added over 9.96 lakh shares or 9.37% in OI. This shows fresh long build up in the index. Volatility continued to cool off as the India Volatility Index, INDIAVIX, came off by 3.34% to 28.7350.

 
Monday is likely to see a soft start to the day. The levels of 10390 and 10460 will act as overhead resistance points. The supports will come in at 10285 and 10210.
 
The Relative Strength Index (RSI) on the daily chart is 64.04. It stays neutral and does not show any negative divergence against the 14-day period. However, upon pattern analysis, it appears to be making a bearish divergence while marking a lower top. The daily MACD is bullish as it continues to trade above its signal line.
 
A doji appeared on the candles. Such a session with a near-similar open and close denotes uncertainty and lack of conviction among market participants. If such a pattern appears during an up move, it might signal a temporary halt in the current trend.
 
The pattern analysis shows that the NIFTY has marked a lower top within a rising channel, and this is not a good sign. This lower top has come following a large bearish candle which reinforces the credibility of this lower top. Unless this level is taken out, the NIFTY might have shifted its resistance lower.
 
There are possibilities of both the things happening. The Markets may see a lower opening on Monday, and at the same time, see some recovery as well from the lower levels. In the same breadth, it is again likely to see selling pressure from higher levels. We recommend traders to not aggressively short in the event of a lower opening and in case of any recovery from lower levels, one should refrain from making aggressive purchases as well.
 
On a broader note, a wide-ranged market is something that cannot be ruled out. While extremely staying stock-specific, a continued cautious outlook is recommended for the day.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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