Set-up For Tuesday: Markets Again Show Fatigue; Remains Prone To Profit Taking Bouts At Higher Level
The markets ended the Monday’s trade with modest gains, but it was for the first time in over ten days that the index displayed very clear signs of fatigue. The NIFTY once again got a robust start to the trade and at one point of time, it traded higher by over 100 points. However, the second half of the session saw the markets giving up all its gains. The index came off over 120 points from the high point of the day and also slipped in the negative territory. A very modest recovery was observed in the last hour of the trade and the NIFTY settled the day with a modest gain of 35.35 points or 0.31%.
Given the price action that was witnessed in Monday’s trade, there are high possibilities that the Monday’s high point has become a temporary top for the markets. Though a stable start is once again expected on Tuesday, the price action of NIFTY against the level of 11530 will be very important to watch. Markets may find it difficult to take out this level easily.
Tuesday is likely to see the levels of 11530 and 11570 acting as immediate resistance area. Supports come in at 11410 and 11325.
The Relative Strength Index (RSI) on the daily chart is 77.6186. RSI has continued to mark its 14-period high, but it does not show any divergence against the price. The daily MACD remains bullish and trades above its signal line. A spinning top emerged on Candles. It has a small real body and almost resembles a Doji. This is a clear indication of marking a potential top for the markets in the near term. However, this will need confirmation in the next trading session.
The pattern analysis on the daily chart shows that after the NIFTY achieved a breakout from the present formation, it has achieved the price target as per the applied measuring implication. This further increases the chances of markets taking a breather and entering some consolidation phase.
Overall, we reiterate exercising caution at current levels and approach markets with highly selective bias. Apart from the sectors that have under-performed over past couple of days, we will see the larger section of the markets undergoing some likely consolidation. If the NIFTY enjoys some upsides, it will remain highly vulnerable to profit taking from higher levels. We recommend continuing to remain very light on exposures and approach the markets with caution over coming days.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)