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Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: NIFTY May See Mild Weakness; Follow Micro Trends By Doing This

Despite staying relatively resilient at the higher end of the trading range, the markets showed some corrective moves as it stepped into the expiry week. The markets opened on a negative note and stayed in the negative territory throughout the day. The NIFTY, however, after testing the morning lows, defended those levels by not making any fresh declines. After the low point marked in the early trade, the NIFTY pulled back and traded sideways in a defined range. The headline index ended the day with a net loss of 62.35 points (-0.56%).

There are possibilities that we may see some mild weakness in the markets going ahead in the immediate short term. This was the fourth day in a row that the NIFTY marked similar highs in the range of 11225-11238 range. In a near sideways move over the past four days, some modest weakness cannot be ruled out unless the NIFTY moves past 11250 level. The volatility too, on the expected lines, increased as the INDIAVIX moved higher by 1.97% to 25.0175.

Tuesday is likely to see a soft start to the day. The levels of 11195 and 11235 will act as an immediate overhead resistance level. The supports will come in lower at 11065 and 11000 levels. Any corrective move will make the trading range wider than usual.

The Relative Strength Index (RSI) on the daily chart is 68.26; it stays neutral and does not show any divergence against the price. The RSI has crossed below 70 from the overbought zone, and this is bearish. The daily MACD is still bullish as it trades above its signal line. A black body emerged; no other formations are present on the candles.

The pattern analysis shows NIFTY near the upper edge of the rising channel that it is trading in at this point in time. In the process, the index also trades above all its key moving averages.

All in all, even if the NIFTY continues to stay in the upward rising channel and maintains its short-term trend, some amount of mild corrective action or ranged consolidation cannot be ruled out. However, with no imminent signs of any major weakness, we recommend not going aggressively shorting the markets as there is also a lot of discomfort that is visible at lower levels.

The best possible way to tackle such a technical setup is to keep following micro trend, on both up side and down side and while doing so, protect profits vigilantly at every levels by using strict trailing stops.

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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