Gemstone Equity Research & Advisory Services

Tuesday Trade Setup: NIFTY Remains Overstretched; Guard Profits While Focusing On These Stocks

Just like it happens on a typical Mahurut session day, the NIFTY opened higher, gradually came off its highs but still managed to end the day on a positive note. The markets saw a gap up opening but marked its intraday high point in the early minutes of the day. After that, the NIFTY gradually pared some of its gains while maintaining most of the opening gains. Not at any one point in time that the Index witnessed any selling or profit taking pressure as a short one-hour session always witnesses token trades. The headline index finally ended with a net gain of 60.30 points (+0.47%).

While the Indian markets were shut on Monday, all global markets were open and so will be the US Markets. NIFTY will adjust to the overnight trade setup gain and will also discount the Saturday’s gain in the process as it adjusts on either side. The short one-hour session has little bearing given its token nature and the markets will again be subjected to broader technicals as it starts trading on Tuesday.

The NIFTY is overbought, and it has also completed its classical measurement implication that arose following a breakout above the 12000 levels. Given the current technical setup, there should not be even a slightest surprise if the markets consolidate or see any profit taking from the current levels.

The RSI is 75.99; it has marked a new high, and this is bullish. It also remains neutral as it does not show any divergence against the price. The daily MACD is bullish as it trades above the signal line.

The analysis for the next trading session stays more or less on similar lines. We might see some incremental moves but chasing them is certainly not advised. Any chase of the momentum in a blind way would be like inviting trouble and getting caught on a wrong foot as the risk-reward is terribly skewed in a unfavorable manner at this time.

We reiterate chasing markets cautiously. We not only recommend guarding profits vigilantly at higher levels but focus more on defensive stocks rather than chasing high beta which are now overdue for some consolidation and profit taking. Even if this means letting go some of the gains, cautious approach is payoff in the long run going ahead from here.

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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