Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: NIFTY Likely To Trade In A Defined Range; Short May Give Some Support But Bias Stays Bearish

The start to the week remained jittery and choppy on the expected lines. The Indian equity markets saw a negative start to the day, oscillated in a wide range before closing with net losses. The NIFTY witnessed a negative start and got eventually weaker in the first half of the session following steep decline in the markets. However, the afternoon trade saw the markets recovering from the lower levels. The Index could not recoup all its losses but managed to recover a good amount of ground from lower levels. The last hour did saw some paring of recovered ground as the headline Index ended the day with a net loss of 159.20 points (-1.60%).

Not only did the session remained a wide-ranging one, the volatility also increased. The India Volatility Index, INDIAVIX, surged by 5.69% to 32.5775. The NIFTY has formed a lower top but higher bottom, and this may mean some resistance to the downside on the next trading day. Some fresh shorts were seen being added to the system on Monday and this may lend some support on the downside in the event of any fresh bearish move, but this can also infuse volatility in the markets. Broadly speaking, we can expect the markets trading in a broad range with increased volatility for the next trading day.

Tuesday is likely to see the levels of 9855 and 9895 acting as resistance points. The supports are likely to come in at 9760 and 9690 levels.
The Relative Strength Index (RSI) on the daily chart is 54.52; it stays neutral and does not show any divergence against the price. The MACD is still bullish as it stays above its signal line. However, the sharp decline of the histogram shows that this indicator is above to give a negative crossover over the coming days.
A black body emerged, apart from this, no other important formations were seen on the candles.
The pattern analysis shows that the NIFTY continues to remain in the upward rising channel that has formed following the resolution of the rising wedge into a continuation pattern. The Index presently stays above the 50-DMA, but below tis 100 DMA with a negative bias.
Monday’s session has seen some addition in the net Open Interest in the NIFTY Futures segment. This shows addition of fresh sorts and tis may lend some support at lower levels if the markets make any downside moves. Having said this, we expect the coming session to remain range bound in nature, though the upsides will continue to stay capped. We recommend approaching the markets in a cautious and in a stock-specific manner avoiding aggressive bets on either side.

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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