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Wednesday Trade Setup: NIFTY Stays In This Broad Channel; Moves To Get Highly Stock & Sector Specific

In what can be called a “mirror-image” of the previous session, the Indian equities managed to recoup all of its losses of the earlier day as it ended on a strong note. The day remained secularly bullish as the NIFTY remained in a rising trajectory throughout the day with no sign of any weakness seen during the day. The day opened on a positive note, and the Index just stronger as the day progressed. It managed to retain its high levels and ended with strong gains of 211.25 points (1.94%).

From the technical perspective, the markets have confirmed the pattern support which is created by confluence of the 200-DMA and the upward rising lower trend line of the channel. The 200-DMA, as of today, stays at 10856. The region of 10856-10900 remains a strong pattern support for the markets as of today. It is also important that we do not ignore the fact that out of 211 points, nearly 150 came from just two stocks: Reliance and HDFC Bank. The volatility index, INDIAVIX, too dropped sharply by 5.98% to 23.6775.

With a stable start expected for Wednesday, the levels of 11130 and 11165 will act as resistance points. The supports will come in at 11030 and 10950 levels.

The Relative Strength Index (RSI) on the daily chart is 59.21; it stays neutral and does not show any divergence against the price. The daily MACD is bearish, and it trades below the signal line.

A large white body emerged on the candles. This signifies a strong consensus on the upside during the trading session. Also, its happening near the pattern support reinforces the credibility of the pattern support.

NIFTY has managed to stay inside the rising channel which it has formed once the rising wedge for resolved as a continuation pattern. The Index has bounced off the lower trend line while validating it as a important support point. The 200-DMA, which is currently at 10856, remains a major support for NIFTY on a closing basis.
The behavior of the markets in general is likely to stay highly stock and sector specific in nature over the coming days. It would be crucial to continue chasing the momentum while vigilantly protecting profits at higher levels. A cautiously positive outlook 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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