Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: Avoid Chasing Up Moves In NIFTY Until The Index Moves Past This Level

One more session for the markets wherein it failed to capitalize on a strong start and succumbing to a weak technical setup. The Indian equity markets had a start to the week on the expected lines. The markets saw a gap up, and much stronger-than-expected opening in the morning. However, after stepping in the fresh week on a strong foot, the NIFTY saw itself trading in a declining trajectory throughout the day. The headline index came off over 200-points from the high point to eventually slip in the negative territory. The NIFTY ended the day on a flat note with a negligible loss of 12.30 points (-0.13%).

The volatility saw a modest decline as it cooled off by 0.96% to 38.0375. The volatility staying at low levels, showing some intermediate complacency, is not an encouraging sign for the markets in the immediate short-term. After falling out of the wedge and clinging precariously at current levels, the NIFTY continues to face higher chances of getting vulnerable at higher levels as it shifts overhead resistance lower.

Tuesday is likely to see a stable start to the day with the levels of 9275 an 9330 acting as strong resistance points. The supports come in at 9200 and 9105 levels.
The Relative Strength Index (RSI) on the daily chart is 49.13; it stays neutral and does not show any divergence against the price. The markets continue to counter the problem of deceleration of momentum as the histogram slope is sharply narrowing despite the daily MACD being bullish and trading above the signal line. Apart from a black body, no other important formation was seen on the Candles.
The pattern analysis does not paint a comfortable picture for the NIFTY. The index has fallen out from the rising wedge, and presently hangs precariously outside this area formation. The 50-DMA, which is currently at 9493, has shifted the overhead resistance point for NIFTY much lower. This DMA appears to be declining sharply, which is likely to bring the overhead resistance point much lower.
All in all, the analysis for the coming day remains much on similar lines. Some modest up moves in the markets can be expected again in the form of mild technical pullbacks. However, any such moves should not be chased so long as NIFTY trades below 9500 levels as the sustainability of such up moves will continue to remain susceptible to profit taking bouts from 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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