Monday Trade Set-up: Markets Remain Precariously Poised; Remain On A Tricky Turf
Friday was a day of yet another modest up-move for the Indian equity markets. After opening on a positive but quite note, the index traded in a defined range for the most part of the day. However, the last hour of the trade saw NIFTY showing a sharp surge from the lower levels just when it seemed as a day with some consolidation. The markets settled the day with modest gains of 67.95 points or 0.59%.
Monday is likely to see a soft to mildly positive start to the trade. Even if the NIFTY witnesses some modest up-sides, the level of 11760 is expected to act as a serious resistance area for the markets. No run-away up-move is expected until this level is taken out. Unless this level is taken out, all upsides will continue to remain vulnerable to profit taking bouts.
Monday is likely to see the levels of 11700 and 11760 acting as very stiff resistance areas. Supports come in much lower at 11600 and 11480. In event of any corrective moves by the markets, the downside range is likely to remain wider as compared to the probable upsides.
The daily RSI is 67.8115; it remains neutral against the price. The daily MACD still remain bullish but it is seen on the verge of reporting a negative crossover over coming days. No significant formations, apart from a white body, emerged on candles.
The pattern analysis of the daily chart shows that NIFTY has very clearly marked a double top at 11760. This level was previously tested in end of August 2018 and then retested in April 2019. These tops, being 7-months apart, lend strong credibility to this double top resistance point.
All in all, few indications still persist on the charts that show that up-moves can be deceptive until the level of 11760 is taken out comprehensively. In the given circumstances, we recommend limited exposures only to traditionally defensive stocks and into sectors that are rotating favorably while keeping it broadly limited. Rather than buying on dips, the present fabric of the markets is more suited for taking profits with every rise. A continued cautious view is suggested for the day.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)