Tuesday Trade Set-up: NIFTY Still Not Out Of The Woods; Has Overhead Resistance Points To Deal With
The equity markets on Friday ended on a buoyant while posting modest gains. Though the markets witnessed a positive start, it remained in a falling channel for major part of the session while steadily paring its opening gains. However, the last hour of the trade saw sharp short covering which took the index towards its high point of the day. Those levels were sustained and finally, the NIFTY ended the day with gains of 71 points or 0.66%.
After the short covering that was witnessed in the final hour of the trade on Friday, the NIFTY has managed to crawl past the important Moving Averages but halted its up move near the 200-DMA which is presently at 10862. Markets would open on Tuesday following an extended weekend. A stable opening can be expected with some follow-up move but the NIFTY still is not out of the woods as has not breached the important Moving Averages comprehensively and still trades below important pattern resistances.
Tuesday is likely to see the levels of 10890 and 10970 acting as immediate resistance points. Supports come in at 10820 and 10760.
The Relative Strength Index (RSI) on the daily chart is 53.6902; it stays neutral and shows no divergence against the price. The daily MACD stay bullish and trades above its signal line. However, the trajectory of this indicators remains much flat. Apart from a small white body that was created on candles, no significant formations were observed.
The pattern analysis on the daily charts suggests that the NIFTY continues to remain in a broad range. It has managed to crawl above the key Moving Averages, but it has not penetrated those levels comprehensively. Apart from this, it remains below its overhead pattern resistance points.
Overall, even if the markets witness some follow-up up move, it is expected to resist at an overhead pattern resistance which is created in form of a lower top. A falling trend line which joins the 11120 level with the subsequent lower 10940 mark, is expected to pose short term resistance to the markets.
Speaking broadly, the index remains in trend less trajectory. We recommend remaining light on exposures and continue protecting profits at each higher level that the markets offer. So long as key overhead resistance levels are not taken out, the NIFTY will remain vulnerable to sell-offs at higher levels which will infuse volatility in the markets. A cautious outlook 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)