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Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: NIFTY To Find Resistance At This Point Going Ahead; Approach Future Moves Like This

The Indian equity markets experienced a lot of volatility as it stepped in the new week. It was also impacted by the external factors that impacted the trading environment and the sentiment as well. Mumbai experienced a nearly city-wide electricity failure that even impacted the NSE in the second half for a very brief time. The markets opened on a stronger note and after marking high in the early minutes of the trade, saw itself paring all those gains. After dipping in the negative for in the late afternoon trade, the markets recovered from those levels to crawl back inside the positive zone. However, while wiping out most of the gains, the NIFTY ended the day with a marginal gain of 16.75 points (+0.14%).

If we discount the external factors that might have impacted the trade, from the technical perspective, the NIFTY has shown signs of fatigue with some higher intensity. The F&O data suggests that the not only the levels of 12000 saw significant amount of call writing throughout the day, the futures also saw some shedding of net Open Interest by the end of the session. The weaker dollar may prevent any major downsides in the markets but the NIFTY consolidating in a defined range cannot be ruled out. The volatility index, INDIAVIX, surged by 3.67% to 21.1275.

Tuesday may see a jittery start to the day with the levels of 12000 and 12035 acting as strong resistance points. The supports come in at 11850 and 11810 levels.

The Relative Strength Index (RSI) on the daily chart is 68.46; it stays neutral and does not show any divergence against the price. The daily MACD is bullish as it trades above the signal line. Apart from a black body that occurred, no other significant formations were noticed.

All in all, we recommend avoiding any chase of momentum even if the NIFTY attempts any up move fueled by liquidity. It would be rewarding from the risk-reward point of view if markets are approach with continued focus on the defensives like pharma, consumption, and non-discretionary groups.  Also, the levels of 12000 is likely to pose resistance to pose resistance to all up moves that may happen from now on. While guarding profits vigilantly at higher levels, a cautious approach to the markets is advised for the day.

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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