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Monday Trade Setup: NIFTY Likely To See A Stable Start; Crucial To Keep Head Above These Levels

In a thoroughly listless day, the markets spent the whole session trading in a very capped and narrow range and ended the day on a flat note. The markets saw a modestly positive opening to the session on anticipated lines. After that, it soon pared those modest gains in the early morning trade. After that, the headline index, and the markets in general went nearly nowhere. The NIFTY refused to take the directional bias for the entire day and kept coming in and going out of the positive territory. The NIFTY finally ended the day with a net gain of 15.20 points (+0.13%).

The NIFTY is currently placed a notch above the double top resistance point of 11430. With a closing level above this, the markets have attempted to take out these levels again. While this attempt remains in force, it would be crucially important for the markets to keep its head above the level of 11430 as any slip below 11400 would mean failure to take out double top resistance and slipping below that point. The volatility stayed at lower levels; the INDIAVIX declined by 2.59% to 20.7125. Not only for Monday, but for the entire week, the behavior of the index vis-à-vis the levels of 11430 would be crucial to watch.

With no negative overnight closing of the US Markets, we expect a stable start to the week. The NIFTY will find resistance at 11510 and 11570 levels. The supports will come in at 11405 and 11360 levels.

The Relative Strength Index (RSI) on the daily chart is 56.45; it remains neutral and does not show any divergence against the price. The daily MACD is bearish as it stays below the signal line. Apart from a small white body that appeared, no important formations were noticed on the candles.

The pattern analysis suggests that the NIFTY has fallen out from a large rising wedge, which appears likely an upward rising channel. The channel has been narrowing sharply and this makes it a wedge. Also, on the positive side, the NIFTY has again attempted to take out the double top resistance point that exists at 11430. 

All in all, the F&O figures suggest some positive move in the markets in the initially. As we progress in the week, the weekly levels will take over the larger technical structure. The F&O figures shows that the NIFTY futures have added over 7.02 lakh shares or 7.03% in the OI. This means that in the event of any corrective decline, we may see discomfort of the participants at lower levels. However, we will definitely need to get cautious if the NIFTY slips below 11400 and stays below it. We recommend shifting focus to defensives like IT, Pharma and consumption stocks for a safer approach towards the market.

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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