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  • Milan Vaishnav, CMT, MSTA

Monday Trade Setup: Volatility Likely To Creep In; Caution Advised As NIFTY Stays Below Imp Levels


The second half of the session saw yet another spell of massive short covering which took the markets higher and saw them ending with decent gains. After witnessing a subdued opening, the NIFTY traded in a limited range for most of the day while remaining in the negative territory. Some short existed at that time which triggered a spate of short-covering and saw the NIFTY moving past the 11000-mark. The headline index ended the day with gains of 93.10 points (+0.85%).


The attack on the facilities of Saudi Aramco and its likely resultant effect on the crude price will invite some reaction from the equity markets as well. Along with this, if we look at the technical levels, the NIFTY continues to trade below its critical resistance levels. All up moves, if there are any, should not be blindly chased unless the NIFTY moves past its critical resistance zone of 11120-11200.

If the impact of crude is digested, we may see some attempts of the markets scaling higher. However, the vulnerability of the markets at higher continues to exist without any second doubts. The levels of 11110 and 11175 will act as immediate resistance points while supports will come in at 11000 and 10950. The range is expected to remain wider than usual.


The Relative Strength Index (RSI) on the daily chart is 52.0383; it has marked a fresh 14-period high, which is bullish. The RSI also shows a bullish divergence against the price. The MACD stays in continuing buy mode while trading above the signal line. No notable formations were seen on the candles.


The pattern analysis on the daily charts continues to show the index trading in a broad trading range after breaching the neckline of the rounding top formation. The index currently rules below the neckline resistance zone, but above the lower base, it has formed following a recent pullback.


Despite the recent pullback that is seen in the markets, the NIFTY is yet to take any final directional bias and continues to remain within a broad trading range. The index also rules below its key resistance area. While continuing to stay highly stock specific in approach, 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)