Gemstone Equity Research & Advisory Services

Wednesday Trade Setup: NIFTY To Get Incrementally Vulnerable In Present Technical Setup; Stay Vigilant At Higher Levels

It was yet another day of a precarious trade as the Indian equity markets inched higher to end on a positive note. The NIFTY saw a strong start to the day, but after the initially stable opening, the markets failed to capitalize on the buoyant opening. The index gradually pared all its gains to end near the previous close. The NIFTY spent the first half of the session without any directional bias. However, the second part of the day went on a positive note. The markets pulled back from the lows and ended the day with a net gain of 98.60 points (1.06%).

The analysis for Wednesday remains on similar lines as the NIFTY continues to remain trapped in the Rising Wedge formation. The directional weakness in the markets is likely to persist despite modest up moves. We have the penultimate day of expiry of the current derivative series, and the session is expected to remain dominated with rollover centric activities. The index also remains vulnerable at higher levels, and any profit booking should not come as a surprise.

Wednesday is likely to face resistance at 9410 and 9465 levels. The supports come in at 9260 and 9185 levels. The trading range is expected to remain wider-than-usual in the event of any corrective moves from higher levels.
The Relative Strength Index (RSI) on the daily chart is 52.49; it stays neutral and does not show any divergence against the price. The daily MACD is bullish, and it trades above the signal line. A Hanging Man emerged on the candles. This can be potentially bearish as the candle has occurred during an up move. It may likely halt the current rally; however, a confirmation is required on the next trading bar.
The pattern analysis shows that the NIFTY continues to remain precariously trapped in the Rising Wedge formation. Unless the NIFTY moves past the 9600-9650 zones, the present technical structure keeps the markets vulnerable to profit-taking from the higher levels and might have bearish implications going ahead.
All in all, from a technical perspective, it is evident that any move on the upside is making the markets incrementally vulnerable to bearish implications so long as it stays in the rising wedge formation. Given the present technical set up, we recommend continuing to adopt a highly selective approach and keep protecting profits at higher levels. Any bearish move going ahead cannot be ruled out so long as the markets stay in the current area pattern. A cautious view is advised for the day.

Milan Vaishnav, CMT, MSTA,
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

Go Back


Previous Editions