Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: Absence Of Overnight Cues May Aid A Steady Start; NIFTY To Stay Ranged Until It Moves Past This Level

In a volatile, but range-bound session of the trade, the markets consolidated and attempted to find a short-term bottom for itself on anticipated lines. The NIFTY opened positive, but soon slipped in the red in the initial minutes of the trade.  However, after the low of 11251.70 that was marked in the first hour, that low stayed defended throughout the day. The Index soon pulled up but continued oscillating in a narrow 50-point range throughout the day. After losing some ground, the last hour of the trade saw a smart pullback which dragged the NIFTY in the positive towards the high point. The headline index finally ended the day with a net gain of 21.20 points (+0.19%).

The US Markets are closed on account of the Labor Day weekend. Because of this, there will be absence of the overnight cues. With no negative technical development expected overnight, we may see the NIFTY attempting to move towards the double top resistance again at 11400-11430 area. The market breadth has seen some improvement; however, NIFTY will have to work hard and move beyond 11430 to be above the double top resistance area to have some incremental gains. The volatility subsided a bit; INDIAVIX declined 2.44% to 21.6100.

Tuesday is likely to see a stable start to the day. The levels of 11400 and 11445 will act as resistance points. The supports stay at 11300 and 11255 levels.

The Relative Strength Index (RSI) on the daily chart is 51.81; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and trades below its signal line. A small hammer occurred on the candles. This is more like a candle with a long lower shadow as it has a upper shadow as well.

The NIFTY presently trades out of the upward rising channel and also below the double top resistance point of 11430.

All in all, we can expect consolidation to continue for some more time with the level of 11430 being crucial. For the NIFTY to recover and resume its up move again, it would be of paramount importance to move past the 11430-mark. Until this happens, NIFTY will continue oscillating in a defined range. We recommend avoiding aggressive shorts unless the NIFTY slips below 11250-11225 levels. While continuing to stay stock-specific, a selective buying may be made while protecting profits at higher levels.

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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