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Monday Trade Setup: NIFTY May See A Stable Start; Watching These Things Crucial For Sustainable Move

Following some hiccups in the morning trade, the Indian equities ended on a strong note on Thursday which was the last trading day of the short and truncated week. The NIFTY opened positive on expected lines but soon pared its morning gains in the first hour and a half of the session to trade very near to its previous close. However, after that, the Index reversed its trajectory. While staying in the upward rising channel for the rest of the day, the NIFTY got stronger as the day progressed. While showing no intent to retrace from the day’s high point, the headline index ended the day with net gains of 176.65 points (+1.20%).

The global trade setup stays neutral to mildly buoyant with the S&P500 testing its lifetime high point. However, that being said, looking from the domestic technical perspective, NIFTY may see a stable to mildly positive opening. The Index has managed to crawl above 50-DMA which presently stands at 14786. It would be crucial to see if the NIFTY is able to stay above this point on a closing basis. The NIFTY PCR across all expiries stand at 1.36. The Index is approaching the upper falling trend line of the channel that it has been trading in; and given the options data, NIFTY may find stiff resistance near 14950-15000.

Monday is likely to see the levels of 15000 and 15090; the supports come in at 14780 and 14700 levels.

The Relative Strength Index (RSI) stands at 52.21; it stands neutral and does not show any divergence against the price. The daily MACD is bearish and trades below its signal line. However, the narrowing slope of the Histogram suggests some potential build up momentum in the pullback.

The pattern analysis shows that the NIFTY has managed to move higher; it has again ended above the 50-DMA which presently stands at 14786. If 50-DMA is violated again on a closing basis, we may see some more weakness creeping in the markets.

All in all, the robust move that was seen on Thursday was more because of short covering; this was evident from the F&O data which showed decline in the Open Interest in the NIFTY April futures. It would be important that this short covering is replaced with fresh buying if the markets are to make any sustainable up moves. The incremental up moves, if any, should be followed in a cautious way. While continuing to adopt a stock-specific approach, profits should be vigilantly guarded at higher levels.

This was first published by The Economic Times

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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