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Tuesday Trade Setup: NIFTY Resists To This Crucial Level; Might Take Some Much Needed Breather

The market remained less volatile than expected and moved in a narrower range while starting a new week. The NIFTY saw a better and positive start to the day and stayed positive throughout the day. After opening on a modestly positive note, the Index surged higher but oscillated in a 120-point range. The last hour of the trade again saw some selling pressure getting exerted from key technical resistance levels as the NIFTY gave up gains from there for the second time in the day. The headline index ended with a net gain of 66.80 points (+0.65%).


As the signs of tiredness emerged again, the markets have again highlighted importance of some key technical levels that exists on the long-term weekly charts. Monday’s saw the NIFTY facing strong supply from the level remarkably close to the 200-Week MA, which presently stands at 10376. Monday’s high of 10393 and this 200-Week MA will continue posing resistance to the markets throughout the week. The India Volatility Index, INDIAVIX, moved higher by 1.65% to 30.4600 as volatility increased marginally.

 
Tuesday is likely to see a tepid start to the day. The levels of 10355 and 10395 are expected to act as resistance points; the supports will come in lower at 10245 and 10190 levels.
 
The Relative Strength Index (RSI) stands at 65.66; it stays neutral and does not show any divergence against the price. The daily MACD remains bullish as it trades above the signal line. A Doji appeared on the Candles. The appearing of a Doji near the near a pattern resistance which also coincides with a critically important resistance point on the higher time frame charts makes the candle more potent and important.
 
The pattern analysis shows that the NIFTY stays in the upward rising channel. However, while trading above two of the three key moving averages, it has formed a potential reversal candle of a Doji as mentioned above. There are strong chances that the NIFTY may halt its up move at present levels and does not move higher significantly unless the high of 10393 is taken out convincingly.
 
With the present risk-on setup still much in the play, we do not rule out the possibilities of some intermittent up moves still taking place. However, in all probability with the markets resisting to a level which is a key resistance point on a weekly chart, the markets are much likely to take a breather at current levels. Going ahead from here, despite some intermittent up moves, markets may cool down a bit until and unless the zone of 10375-10395 is taken out with force. We recommend avoiding any major long exposures and continue approach the markets with high degree of caution.  

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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