Trade Set-up For Monday: Corrective Undertone To Persist; Keep Exposures At Modest Levels
The Friday’s session saw the markets taking a breather and undergoing a mild correction while halting its unabated up-move that was seen over past couple of days. After a positive opening, the NIFTY pared over 140-points from the high of the day. The index ended the day losing 64.15 points or 0.56%.
The previous session remained technically important as it has attempted to establish a temporary top for the markets. If not a temporary top, it has certainly established the zone of 11570-10600 an important resistance area for the markets. We expect a negative start to the trade on Monday. Having said this, even if NIFTY attempts a pullback or witnesses any intraday surge, it should be best avoided as any sustainable up move shall occur only above 11570 levels.
Monday is likely to see the levels of 11510 and 11570 acting as immediate resistance points. Supports likely to come in lower at 11410 and 11320.
The Relative Strength Index (RSI) on the daily chart is 72.0034; it remains neutral and shows no divergence against the price but trades in the overbought zone. The daily MACD continues to trade above its signal line.
A big black candle emerged on the charts. It occurred when the markets were steeply overbought. Its occurrence near the 11570 point also establishes this level as the immediate major resistance point for the markets.
Broadly speaking, the corrective intent of the markets is likely to persist on Monday as well. This might see some modest increase in volatility compared to what we saw over past several days. With the Bollinger bands getting much wider than normal, there are higher chances of the NIFTY remaining in a range and not showing any runaway up move. Up-moves, if at all there are any, should be best avoided as that will make markets vulnerable to profit taking bouts again from higher levels.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)