Thursday Trade Set-up: Breakout Yet Unconfirmed; 11760 Still Important As Risk Quotient Rises
It was yet another day of a strong move when the NIFTY re-tested its previous double top resistance and lifetime high zone of 11760 and attempted to achieve a fresh breakout. The markets enjoyed a positive start to the trade, and it got even stronger as the day progressed. The volatility index VIX also continued to rise to new recent highs and the NIFTY ended the day with a gain of 96.80 points or 0.83%.
At the cost of sounding skeptic and a pessimist, we strongly feel this is a time to take a critical and realistic view of the situation. The VIX has thrown the negative relationship with the markets totally out of balance, the Rupee has been depreciating in a volatile way against the USD, the Brent Crude trading at 2019 highs and persistent negative divergence of markets against its lead indicators do not paint a pretty picture at present
We may see a tepid start to the trade. The Markets will open on Thursday after a gap of one day and will adjust to the global markets. Global markets remain flat and we may again see NIFTY initiating the day on a quiet note. The breakout has been attempted but the markets are yet to confirm the breakout. In any case, the markets, in its present situation, has got extremely elevated risk profile for most traders and investors.
Thursday is likely to see the levels of 11810 and 11865 acting as immediate resistance points. Supports come in at 11760 and at 11550.
The Relative Strength Index (RSI) on the daily chart is 68.4392 and it show a bearish divergence against the price. The daily MACD is bearish and it trades below its signal line.
The pattern analysis of the daily chart shows that the NIFTY has made a fierce attempt to break the double top resistance on the upside. However, with the complete breakout not achieved as yet, the level of 11760 still remains an important level to watch for. The broader technical parameters suggest all coming up moves prone to volatile swings. In event of any up moves, we reiterate using such upsurge in the markets to protect profits at higher levels. There will be sectoral out-performance in some pockets and all fresh purchases should be kept focused on such sectors and defensive stocks which are rotating favorably at present.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)