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Monday Trade Setup: Signs Of Fatigue Visible On NIFTY; Guard Profits Unless Index Penetrates This Level

It was a day of corrective move for the markets again as the NIFTY consolidated in a measured and defined range before ending the day with a modest loss. The markets opened on a mildly negative note, but the early morning trade saw the NIFTY recouping the opening losses to trade flat near the previous close. However, it saw a corrective move which took the index lower. Some recovery was seen in the second half of the session, but the Index stayed and traded in a limited range. The headline index finally ended the day with a loss of 45.40 points (-0.42%).

Over the past five session, the NIFTY resisted the 10800-10880 zones and the 200-DMA which presently stands at 10884. Over the immediate short term, this zone will act as a stiff resistance point. Unless the NIFTY moves past this zone and closing above the 200-DMA convincingly, it will stay vulnerable to selloffs at higher levels. Some signs of fatigue are visible, and this requires traders to guard their profit vigilantly at higher levels.

Monday is likely to see a tepid start to the day. The levels of 10850 and 10880 will act as resistance points. The supports will come in at 10700 and 10610.

The Relative Strength Index (RSI) is 67.55; it stays neutral and does nt show any divergence against the price. Any move on the downside by the RSI will result into a bearish failure swing. A bearish failure swing occurs when the NIFTY crosses below 70 from an overbought zone, move up higher but does not take out the previous high, and then moves down again. The daily MACD is bullish as it trades above its signal line. A Doji emerged on the candles signifying an indecisive mindset of the market participants devoid of any conviction.

The NIFTY presently trades below the 200-DMA which is currently at 10884. This level is a major resistance point for the markets on a closing basis. Significant up moves will not occur until the NIFTY penetrates the 200 DMA and closes above that level with volumes. Until this happens, we recommend traders to keep guarding their profits vigilantly at higher levels. Gains and outperformance will remain limited to only a few sectors and stocks. A cautious approach with vigilant protection of profits at higher levels 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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