Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: Technical Structure Broadly Stable For NIFTY; This Zone Stays Critical To Watch

The Indian equity markets continued to post incremental gains but came off before ending the day with a modest gain. The markets saw a better-than-expected opening for the day. After starting the session on a positive note, the markets got stronger as the day progressed. However, after marking the peak in the early afternoon trade, the NIFTY came off over 80-points from the high point of the day. The last hour saw the index trading in a ranged manner. The headline index finally ended with a modest gain of 56.10 points (0.50%).

The general technical setup of the NIFTY appears to be stable. However, the zone of 10300-10350 continues to pose stiff resistance to the markets. Though the markets may remain broadly stable, these levels need to be watched closely. NIFTY may also be affected along with the Asian peers if the US Dollar, which is grossly oversold, posts a mild technical rebound. A technical rebound in the Dollar Index may see the Emerging Markets taking some breather from the current run. The volatility index, INDIAVIX, came off slightly by 0.30% to 22.5100.

A few of the Banking and Financial Stocks along with some liquid good quality midcaps may see some relative outperformance on Tuesday.  The levels of 11300 and 11350 will act as resistance. The supports come in at 11215 and 11165.

The Relative Strength Index (RSI) on the daily chart is 64.32; it stays neutral and does not show any divergence against the price.  The daily MACD remains bearish as it trades below the signal line.

The Index trades stable and exactly in the middle of the rising channel that was formed once the rising wedge formation got resolved in a continuation pattern. The Index trades comfortably above all the key moving averages with the 200-DMA acting as a important support at close levels. The 200-DMA is currently placed at 10849.

Except for the grossly oversold Dollar Index staging a technical rebound, there is no other major threat to the emerging markets in general and the Indian NIFTY in particular. The markets are likely to continue trading in a broad range; however, the zone of 11300-11350 will be a stiff overhead resistance. While avoiding aggressive shorts, one may follow the momentum but only with a vigilant protection of profits at higher levels.

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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