Gemstone Equity Research & Advisory Services

Monday Trade Setup: NIFTY Lacks Convincing Directional Bias Amid Weak Technical Setup; Refrain From Doing This

The end to the trading week remained quiet as the markets did not make any significant directional move and ended on a flat note. The NIFTY witnessed a modestly positive opening, but it soon slipped in the negative territory in the initial minutes. The Index kept gradually trend lower while it marked its lows in the late morning trade. However, the second half of the session saw the NIFTY recovering again from the lower levels. By the close, the Index recouped all its losses and ended with a negligible loss of 5.90 points (-0.6%).

The NIFTY moved in a capped 100-point range in the previous session. The India Volatility Index, INDIAVIX, declined marginally by 0.43% to 38.0775. The stimulus which has not fully declared has failed to enthuse the markets as it is perceived to be a good long-term measure that is failing to address the immediate problems that are likely to trouble the economy further. In any case, few pullbacks can be expected, but they will continue to remain capped at higher levels.

Monday is likely to see a tentative start to the week. The levels of 9190 and 9245 will act as resistance points. The supports will come in at 9050 and 9000 levels.
The Relative Strength Index (RSI) on the daily chart is 47.13; it continues to remain neutral as it shows no divergence against the price. The daily MACD is bullish as it trades mildly above the signal line. A small hammer-like candle has appeared on the charts. This is not a classic hammer as the lower shadow is not long enough as required; in any case, it is unlikely to have any significant impact under the current technical setup.
The pattern analysis shows a highly fragile technical structure of the markets. The NIFTY has fallen out of the rising wedge formation; it stays below its 50-DMA. The 50-DMA, which is presently at 9292, is likely to act as formidable resistance on a closing basis in the event of any technical pullback.
All in all, the markets remain more in a no-trade area, more so, when it is not exhibiting a convinced directional bias. The technical setup remains weak; the markets will continue showing a negative bias. All pullbacks, if there are any, will find selling pressure at higher levels. We reiterate refraining from taking aggressive long positions in an attempt to chase a technical pullback or while attempting to make purchases at lower levels.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

Go Back


Previous Editions