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Monday Trade Setup: NIFTY To See A Quiet Start; Moves Likely To Stay Ranged With Limited Upsides

In the previous technical note, we had mentioned that some technical pullback may occur as the Index had witnessed an unreasonably near-vertical decline. While continuing to trade precisely on the expected lines, the Indian equities threw some technical pullback to end the day with gains. The markets saw a positive opening, but soon pared the opening gains to slip in the negative territory for a brief period as it marked the low point of the day. The Index soon recovered to crawl back inside the positive zone. The rest of the session was spent by the markets oscillating in a defined range. The headline index went on to end the day with a net gain of 82.10 points (+0.70%).

It is important to note that although the markets gave some technical pullback, the upsides have remained measured and limited. This also has been on the anticipated lines. The markets have pushed themselves in a broad consolidation range; any upsides will stay limited in its extent and we will continue seeing profit taking bouts at higher levels. While the NIFTY may stay in a wide consolidation range for some time, the moves on either side will remain limited. The volatility cooled down a bit with INDIAVIX coming off by 1.87% to 21.6450.

Expect a quiet start to the day and the week on Monday. The levels of 11800 and 11865 will act as immediate resistance points. The supports will come in at 11700 and 11640 levels.

The RSI on the daily chart is 57.84; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and it trades above the signal line. A small white body emerged on the candle resembling a spinning top. It does not denote anything significant except for a session that saw limited moves with a bit of indecisiveness among market participants.

From the pattern analysis point of view, the immediate support on a closing basis for the markets is at the 50-DMA which presently stands at 11443. It is very much evident that for the immediate short term, the index has been pushed in a broad consolidation range that is crated between 12000-and the 50-DMA.

All in all, we suggest continuing to approach the markets with a cautious approach. The sector rotation is very much visible in the markets and the coming days are likely to stay highly sector and stock specific. The up moves should not be chased as the pullback that was seen on Friday has been on the basis of short covering as evident from the reduction of the OI that has come with the rise. It is important that the short covering is replaced with fresh buying before we go all out chasing the up move. While staying stock specific in making purchases, profit should be guarded with every move that is there on the upside.

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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