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Tuesday Trade Setup: NIFTY To See A Jittery Start; Crawling Back Above This Level Crucial

In a very disappointing and ugly day of trade, the Indian equities fell in line with the global weakness and ended the day with a deep cut. The markets saw a positive opening for the day and traded with limited gains until afternoon. Despite negative Asian markets, the Indian markets relatively outperformed its peers in the first half of the session. The second half of the trade, however, saw the markets coming under immense selling pressure. The NIFTY came off over 315-points from the high point of the day. A mild recovery was seen, but it also got sold in to as the NIFTY ended near its low point. The headline Index ended the day with a net loss of 254.40 points (-2.21%).

The Monday’s session remained technically damaging in more than one way. The NIFTY drifted below the 11430 levels and this means that the attempt to move above the double top pattern resistance has miserably failed again. So, this means that the NIFTY has shifted its resistance lower to 11430-mark. Also, the Index has tested its 50-DMA which presently stands at 11273. The NIFTY has closed a notch below this point. Unless it crawls back above this point, it may invite some incremental weakness. The volatility spiked as the INDIAVIX surged by 10.69% to 22.1875.

Tuesday might see a jittery start to the day. The levels of 11295 and 11360 will act as resistance points. The supports come in at 11210 and 11180.

The Relative Strength Index (RSI) on the daily chart is 44.06; it has made a new 14-period low which is bearish. It does not show any divergence against the price. The daily MACD stays bearish as it trades below the signal line. A large bearish candle emerged just at the pattern resistance zone. This not only validates the pattern resistance that existed at 11430 and above but also shows large downside consensus that was seen during the day.

All in all, the markets in general are likely to see limited upsides going ahead. Whatever up move that we may see would be just technical pullbacks. Importantly, until taken out again, the level of 11430 will now act as an immediate short-term resistance for the markets going ahead. All up moves will find strong resistance near this level. NIFTY will require strong conviction to move past his level again. We recommend avoiding high leverage exposures. It is strongly suggested to stick to defensives and low beta stocks while adopting a cautious view on the markets 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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