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Monday Trade Setup: NIFTY Stares At Another Attempt To Move Higher; Navigating This Zone Crucial

After consolidating for two days, the markets have attempted to break above the crucial levels again as they staged a strong up move on Thursday and ended the day with decent gains. The NIFTY saw a gap up opening and got stronger as the day progressed. The NIFTY stayed in a capped range, but the index was able to maintain its opening gains and even build on it further. Although the markets stayed in a defined range, the volatility was near-absent in the previous session. After trading steady for the whole session, the headline index ended with net gains of 169.40 points (1.51%).

The Indian markets will open while adjusting to global trade setup as Friday was a trading holiday in India on observance of Gandhi Jayanti. The NIFTY has ended near the high point; from the technical perspective, it may mean that follow up move may happen. Also, the index has ended just near the crucial double top resistance zone of 11400-11430. Any move beyond 11450 would mean yet another strong attempt to move and break above this crucial resistance zone. The F&O data also point towards adding of fresh longs in the market. The volatility dipped as the INDIAVIX came off by 6.04% to 18.3500.

A steady start to the day is expected. Monday will see the levels of 11450 and 11565 acting as resistance points. The supports will come in at 11350 and 11235 levels.

The Relative Strength Index (RSI) on the daily chart is 54.67; it has continued to mark a new 14-period high which is bullish. RSI, however, also remains neutral as it does not show any divergence against the price. The daily MACD is bearish as it stays below the signal line. However, the sharply narrowing slope of the histogram shows this indicator moving towards a positive crossover over the coming days.

A rising window occurred on the candles. This results out of a gap on the upside and usually resolves with a continuation of the uptrend. However, this would need confirmation on the next trading bar.

The pattern analysis shows the zone of 11400-11450 as an area which see confluence of two pattern resistance points. This zone has the double top resistance at 11430 and near 11450, it has a falling trend line that joins 11800 and subsequent lower tops. This zone, therefore, remains a crucial area for the NIFTY to navigate going ahead from here.

The close examination of F&O data shows there is underlying buoyancy in the markets, at least in the near term. This is evident not only in the addition of Open Interest in the Puts at the levels 11400 and below, but the NIFTY current month futures have also seen addition of net Open Interest by over 2.83 lakh shares or 3.14% in Open Interest.
Regardless of the above figures which indicate underlying buoyancy in the very near-term, we recommend staying highly vigilant at higher levels until the zone of 11400-11460 is taken out convincingly and the markets stays above that. We expect some high beta performers like financial stocks attempting some outperformance along with the defensives like consumption and IT. 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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