Gemstone Equity Research & Advisory Services

Monday Trade Setup: NIFTY Likely To Consolidate In A Broad Range Again; Treat All Up Moves In This Way

In what was a trading day of continued momentum, the Indian equities extended its advances on the back of the global buoyancy. The NIFTY opened on a positive note and stayed positive throughout the session. The markets opened positive and the first hour of the trade had range-bound moves. However, the NIFTY got stronger as it transformed itself in a rising trajectory. Besides a minor retracement that came in the afternoon trade, the trajectory for the day was steady and devoid of any volatility. The headline index ended yet another day with on a positive note gaining 143.25 points (+1.18%).

The NIFTY has achieved a breakout as it has move past the 12000-12030 zone. Over the past four sessions, the Index has gained 600-odd points. Although it has achieved a breakout, the primary reason of the rally is the global one fueled by US Elections. With now the results out, it is perhaps the time for the markets, not just Indian but across the globe, to digest and discount the US elections outcome in the present price. It would not be surprising if the markets, in general, consolidate at current levels even if it sees some incremental upside.

Monday is likely to see the levels of 12300 and 12345 acting as resistance points. The supports come in at 12150 and 12000 levels.

The daily RSI is 68.45; it continues to show a bearish divergence against the price. The RSI has not marked a 14-period high on lines with the Index and this has resulted into the current bearish divergence. The daily MACD is bullish as it trades above the signal line.

Apart from a strong white candle that appeared, no other formations were noticed on the charts.

The pattern analysis shows that after spending nearly 14 sessions within the large bar formed during the session on October 15th, the NIFTY finally broke out on the upside as it moved past the upper resistance area of 12000-12030. Currently, the index has recovered more than what it had lost during the pandemic meltdown and remains inches away from the lifetime high.

Looking at the external factors that fueled the current rally across the globe, we can expect all the global markets to consolidate, and India will be a no exception. It should not come as a surprise if we see the domestic markets taking some breather and consolidating at higher levels. However, unless there is a clear evidence of profit taking, shorts should be avoided. The up move, if any should be chased very cautiously while guarding 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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