Gemstone Equity Research & Advisory Services

Monday Trade Setup: NIFTY To See A Stable Start; Moving Past This Level Crucial For Any Incremental Upside

The markets refused to take any directional cue on the last trading day of the week as it oscillated in a defined range and ended on a flat note. The markets started on a flat note and after dipping slightly in the red in the morning trade, it crawled back inside the positive territory. The NIFTY spent most of the day trading in positive territory but with capped range. It was the last hour of the session again that led to undoing of the day’s gain. The index not only pared all its gains but dipped well into the negative zone. However, the markets once again managed to recover all the losses and finally closed flat with a negligible loss of 10 points (-0.07%).

The NIFTY continues to hold maximum Call OI concentration at 15200 as of now. This means that unless the NIFTY is able to move past this level and sustain above that point, it will stay vulnerable to profit taking bouts at higher levels. The FO data does not offer any strong directional cues, but the longer timeframe charts stay evidently overstretched and overextended. On the other hand, NIFTY futures have seen addition of some Open Interest indicating built up of some short positions and the NIFTY PCR stands healthy at 1.38. The volatility declined as INDIAVIX came off by 3.79% to 23.0450.

Monday is likely to see a steady start to the week. The levels of 15200 and 15295 will act as immediate resistance points; the supports come in at 15100 and 15020 levels. While the upsides are expected to stay capped, any corrective move is likely to make the trading range wider than usual.

The daily RSI is 69.85; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line. A Spinning Top occurred on the candles. This shows the tentative behavior of the market participants and occurrences of Spinning Tops near peak following steep uptrend may lead to disruption of the current uptrend. However, this will need confirmation on the next bar on the charts.

All in all, the NIFTY is hanging precariously near its peak levels. The upside moves may happen, but if at all the markets extends its up move, it will stay highly limited in its extent. The upsides will continue to stay capped with the markets remaining vulnerable at higher levels. With US Dollar likely to get resilient, the IT stocks may see some traction over the coming days. We recommend continuing to stay high stock-specific and approach markets on a highly cautious note while keeping exposures at modest 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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