Gemstone Equity Research & Advisory Services

Trade Setup For Monday: NIFTY To See A Stable Start; Supports Shift Higher As This Gap Is Now Filled

Markets continued with its surge on the last trading day of the week as the Index marched higher as it stepped into a new derivative series. August series had ended on a buoyant note and the September series started on a strong note. The markets opened on a positive note and got stronger by afternoon as it marked the day’s high point. After that, the Index stayed range-bound maintaining its gains. After oscillating in 35-point range for the rest of the session, the headline index ended with a net gain of 88.35 points (0.76%).

From the technical perspective, the NIFTY has filled up the gap that existed in the 11430-11500 zone, and this an important development. For the near-term, any consolidation should find support near this zone. With the NIFTY now firmly placed in the rising channel, the probabilities of it testing the upper trend line has risen considerably. The global risk-on, which is being fueled by gush of liquidity is also very much in place and this will do what it takes to push equities higher. The volatility continued to fall as INDIAVIX came off by 2.90% to 18.3475.

Monday is likely to see a stable start to the week. The levels of 11700 and 11785 will act as resistance; supports come in at 11610 and 11550.

The Relative Strength Index (RSI) on the daily chart is 71.17; it has marked a fresh 14-period high which is bullish. RSI is neutral and does not show any divergence against the price; it now trades mildly overbought. The daily MACD is bullish and it trades above the signal line.

The pattern analysis shows NIFTY comfortably inside the upward rising channel.  The index had tested the lower trend line of this channel a couple of times in the recent past but has managed to bounce off from that pattern support. NIFTY is now well above all its key moving averages.

With the NIFTY bouncing off and rallying over the past several days, it has shifted its supports higher to its 20—DMA which is presently at 11315 for the immediate short to medium term. The NIFTY has added to its fresh longs as the F&O data suggests 4% addition of net OI in NIFTY futures. We expect financials and midcaps to put up a resilient show; among the other front-line stocks, defensives will be seen consolidating themselves. We recommend chasing the momentum carefully while adopting a cautiously positive approach 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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