Gemstone Equity Research & Advisory Services

Outlook For Monday: NIFTY Is Likely To See A Soft Start; Stay Vigilant While Chasing The Momentum

After opening on a quiet note and spending some time below the 100-DMA, the NIFTY moved past that level as it extended its up move. The Index traded in a capped range in the first hour of the session. After that, the NIFTY formed a rising trajectory and kept steadily moving higher. Despite some small intermittent dips during the day, no major corrective move took place. It comfortably stayed above the crucial 100DMA and managed to end the day with a net gain of 152.75 points (+1.51%).

For Monday, the opening levels of the NIFTY and the trajectory that it forms after that will affect the trend for tomorrow. The US markets have ended in the negative and we might see some weakness spilling over in the Asian trade as well. There are possibilities that the NIFTY opens negative, but just near or above the crucial 100-DMA. It would be important to see the price action after that during the day. The Volatility continued to cool off as the India Volatility Index, INDIAVIX, declined by 4.74% to 29.9650.

Monday is likely to see a soft start to the trade. The levels of 10250 and 10335 will act as resistance points; the supports will come in lower at 10175 and 10100 levels.
The Relative Strength Index (RSI) is 64.35; it stays neutral and does not show any divergence against the price. The daily MACD has turned bullish again as it shows a positive crossover. However, with histogram almost flat, the momentum stays negligible on this indicator. A white body emerged on the candles. This shows the upward nature of the trend during the day.
The pattern analysis shows the NIFTY continuing to trade in the upward rising channel. In the process, it now presently trades above 2 of its 3 key moving averages. The index is now above its 100 and 50 DMA. However, both of these averages remain below 200 DMA which shows that the Index is in intermediate trend and the primary uptrend is still disrupted in the near term.
With the unabated up moves have made chasing the momentum riskier than before. In the present technical setup, the best way to approach such structure is to keep strictly trailing the stops or staying away from creating aggressive longs completely. We recommend not getting complacent at current levels and continue approach the markets with a vigilant and cautious approach.

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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