Monday Trade Setup: NIFTY May Continue To Exhibit Tentative Behavior; Mild Negative Bias May Persist
While trading on anticipated lines, the equity markets consolidated on Friday in a defined range before ending with a modest loss. The trading range remained narrow, and the market participants exhibited an exhausted and lackluster behavior, and this was evident from the formation of a lower top and higher bottom on the charts. After oscillating in a 60-point range, the NIFTY ended the day with a loss of 58.80 points (-0.51%).
Monday is likely to see a lukewarm start to the week. The week is expected to kick off on a defensive note, and we expect the markets to continue exhibiting a corrective bias, and it may show tentative behavior. The markets continue to remain overstretched on the short term charts, and it is not likely to show any run-away rise in the immediate short term. Any up move will find resistance in the 11650-11700 range, and the vulnerability of the markets to profit-taking will increase with each higher level that it sees.
Monday is likely to see the levels of 11560 and 11610 acting as stiff resistance points. The supports are expected to come in at 11465 and 11410.
The RSI on the daily chart is 60.6359; it stays neutral and does not show any divergence against the price. The MACD remains bullish and trades above its signal line.
The pattern analysis on the daily charts shows that the NIFTY made a sharp up move following the announcements of fiscal stimulus, and it created a gap between the 50 and the 100-DMA. The up move found resistance between the 11600-11700 zones and the NIFTY has retraced from those highs. It is expected that the gap that was created a couple of days back will get filled going ahead.
The weekly options data shows that the up moves may remain capped just below 11600 levels. We expect the markets to find supply with every rise that it may give. The gains are likely to stay concentrated and stock-specific. The market breadth also continues to remain a concern, and for any move to sustain at higher levels, the market breadth needs to be healthy as well.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)