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Tuesday Trade Setup: NIFTY Set To See A Tepid Start To The Day; Broader Range Still Stays Intact

Partial lockdown in Maharashtra and unabated rise in the fresh Covid cases dampened the sentiments in the markets. The Indian equity markets grossly underperformed the global peers and ended with a cut. The Markets saw a weaker-than-expected opening and got further weak as the day progressed. It soon slipped below the psychological 14500-levels at one point in time. However, the NIFTY did recover from its low point, but the recovery was not substantial. The headline index finally ended the day with a net loss of 229.55 points (-1.54%).

Looking from a technical perspective, despite the ferocity of the decline, the NIFTY has not damaged the broader technical picture on the charts. The Index still remains in the falling channel that it has been in over the past many days. However, it has again slipped below the 50-DMA which presently stands at 14788 and has closed below this point. This level of 50-DMA will continue to post a serious resistance on a closing basis for the Index. The volatility spiked on the expected lines as the INDIAVIX rose 6.14% to 21.2150.

Tuesday is likely to see a tepid start to the day. The levels of 14700 and 14765 will act as resistance points; the supports will come in at 14600 and 14500 levels.

The Relative Strength Index (RSI) on the daily chart is 47.19; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and remains below its signal line.

The pattern analysis on the daily charts show that the NIFTY is in the falling channel which is formed following the retracement from the all-time high point of 15431. The index has not violated either ends of the channel except that it has slipped below the 50-DMA level on a closing basis. This level will continue to act as resistance.

The defensive play was evident in the previous session as the IT, Pharma and Mid-cap and consumption stocks did better. This setup is likely to persist over the coming days as well. It is expected that the NIFTY will continue to exhibit a tentative bias and stay within a broad and defined range and within the present falling channel. It is recommended that while keeping the exposures at modest levels, it would be prudent if the markets are continued to be approached on a selective note while vigilantly guarding the profits 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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