Gemstone Equity Research & Advisory Services

Monday Trade Setup: NIFTY Likely To See A Tepid Start; Set To Get Vulnerable Near These Levels

It was a day of a mild corrective move for the markets. On the last day of the trading week as well as the month, the NIFTY opened on a mildly positive note. However, after trading in a defined range in the initial session, the Index drifted in the negative territory. It posted some declines, but the trading range remained limited. The headline index continued to drift slowly without any volatility and showed no intent to recover from lower levels. In the end, the NIFTY ended with a mild decline of 28.70 points (-0.26%).

The NIFTY has failed to move past 11300-11350 zone. This zone has become immediate resistance zone for the near term. The volatility continued to decline on as India Volatility Index, INDIAVIX, came off by 2.16% to 24.1925. With the mentioned zone now acting as a near term strong resistance, all up move will get weak and will also make NIFTY vulnerable near these levels.

Markets are likely to see a tepid start to the day. Monday will see the levels of 11130 and 11165 acting as resistance points. The supports will come in at 11030 and 10960 levels.

The Relative Strength Index (RSI) on the daily chart is 60.72; there was a sell signal on RSI 3 days ago. The RSI is neutral and does not show any divergence against the price. The daily MACD is bearish; it trades below its signal line. A black body emerged on the candles; apart from this no other formations were noticed.

The pattern analysis shows that the NIFTY remains in the upward rising channel; it continues to trade above all its key moving averages. However, that being said, the Index had shown some weakness near the upper edge of the rising channel after it resisted to the 11350 points for several times. After an initial attempt to move higher, the index slipped lower, and made the 11300-11350 zone as an immediate resistance zone for the markets for the near term.

We can see the markets taking some breather from current levels. This breather can come in form of a broad ranged consolidation or some mild corrective move from current levels. We recommend approaching the markets in a stock-specific manner. While avoiding any aggressive long exposures, positions should be kept light and each up move, if there is any, should be used more to protect profits than for making purchases. A cautious view is advised 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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