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Monday Trade Setup: NIFTY May See A Stable Start To The Day; May Get Vulnerable At These Levels

It was yet another day for the markets where it failed to capitalize on the initially good start to the day. The markets saw a decently positive start to the day on Friday, however, after trending sideways, the NIFTY gradually pared most of its opening gains. After trading in a defined and capped range during the first half, the index transformed itself into a falling trajectory and gradually kept losing ground. It eventually ended with a modest gain of 52.45 points (+0.57%) after coming off over 100-points from the high point of the day.
 


Monday is expected to see a stable start to the day. However, the NIFTY is placed precariously outside the rising wedge after it fell off from the area pattern. Some mildly positive moves cannot be ruled out, but NIFTY remains much vulnerable to a continued downside from each higher level that it gets. The volatility continued to decline, which remains a matter of concern. The INDIAVIX came off by 3.81% to  38.4075.

 
Monday is likely to see the levels of 9295 and 9345 as resistance points. The supports will come in at 9210 and 9115 levels.
 
The Relative Strength Index (RSI) on the daily chart is 49.36; it stays neutral and does not show any divergence against the price. The PPO is positive. The daily MACD is bullish and trades above its signal line; however, the histogram slope suggests a steep decline in momentum with the indicator moving towards a negative crossover over the coming day.
 
Apart from a black body that occurred, no other formations were observed on the Candles.
 
The pattern analysis shows the NIFTY in a precarious position. The NIFTY has fallen out and gave a breakdown on the downside from a Rising Wedge formation. This is on the expected lines as the patterns like rising wedges are usually formed during a bear market rallies; in most cases, they get resolved with a resumption of the downtrend.
 
While keeping the analysis for Monday on the similar lines, we reiterate not chasing the up moves, if there are any. It is best advised to adopt a selective and stock-specific approach and refrain from aggressive buying at current levels while adopting a cautious view on the markets.

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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