Gemstone Equity Research & Advisory Services

Monday Trade Setup: NIFTY May See A Soft Start; Markets Lacks The Required Momentum To Move Higher

The day of maintained gains fizzled out in the last hour and a half of Friday as the NIFTY not only gave up all gains but also showed wide ranging swings on either side. The markets showed a strong and positive start to the day. The beginning stayed on better-than expected lines. The good thing was, the NIFTY maintained those opening gains through the most part of the trading session. It was the last hour and a half that wiped out the entire day’s hard work of the markets. The NIFTY not only gave up all its gains but also slipped hard in the negative territory. The index came off over 100 points from the high point. However, some recovery was seen, and the headline index ended the day with a nominal loss of 11.15 points (-0.10%).

From the technical perspective, the previous session stays one of the important sessions. An engulfing bearish candle was formed following a spinning top a day before that. This highlights the discomfort of the NIFTY at higher levels and also highlights the lack of conviction that it needs to confirm the doublet top breakout above 11430. Given the previous session, the levels of 11430 still remain an important level to watch and NIFTY will have to keep its head above this level to avoid incremental weakness. The volatility declined despite wide moves as the INDIAVIX came off by 0.27% to 20.0450.

Monday’s opening by somewhat jittery and soft in nature. The levels of 11545 and 11590 will act as resistance points. The support will come in at 11430 and 11390 levels.

The Relative Strength Index (RSI) on the daily chart is 56.13; it continues to remain neutral and does not show any divergence against the price. The daily MACD is still bearish; it trades below its signal line.

The pattern analysis on the daily chart shows the NIFTY outside the large wedge formation. However, it presently trades above the double top resistance area which is 11430; this level is important as the NIFTY needs to move on with conviction to confirm a breakout. Presently, it is seen moving in a wide range while lacking conviction it needs for further up move.

All in all, if we look at the immediate short-term technical setup, the NIFTY is likely to find resistance at each higher level. We recommend continuing to stay highly stock- specific in the approach. There are mild chances of the US Dollar slightly pulling pack; a mild technical pullback is imminent, and this may cause some volatile move or a mild disruption in the markets. Apart form this, the financial stocks are showing very weak relative strength and may underperform the broader markets. We recommend a cautious approach for the coming 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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