Tuesday Trade Setup: Markets Set To Approach Trade With A Weak Technical Setup; May Test 11550-Mark
We had mentioned in our previous note that given the overall technical setup; NIFTY is prone to make sharp moves on the downside. On the expected lines, the Indian equity markets saw a long overdue corrective move which it has been resisting over couple of days. The markets began the week with a gap down opening and remained in the negative territory for the entire session. Apart from few feeble moves, no attempt to recover from the lows was made and the headline index NIFTY subsequently ended the day losing 114 points (-0.97%).
Markets are set to approach Tuesday’s trade with a weak technical setup. The VIX has risen by 9.99% to 26.43 and remains at a multi-year high level. The markets continue to show weakness on its lead indicators and there are high probabilities of it testing the 11550 support and even breach it eventually.
Tuesday will see the level of 11630 and 11675 acting as immediate resistance point for the markets. The supports come in at 11550 and 11460 levels.
The Relative Strength Index (RSI) on the daily chart is 50.3791 and it has marked a fresh 14-period low which is bearish. It also shows bearish divergence against the price. The daily MACD stays bearish while trading below its signal line.
A falling window occurred on Candles. It also had a spinning top which has a small real body and often shows indecisiveness of the market participants and potential loss of momentum. A falling window results out of a gap down and it can have even more bearish implications going ahead.
Given the pattern analysis of the daily chart, the double top at 11760 has remained intact despite one failed attempt by the NIFTY to break above it. We expect the session on Tuesday to remain volatile and expect the markets to trade with bearish undertone. Few attempts of short covering may be seen but any major upsides are not expected. The level of 11550 which might act as a short-term support will be important to watch. Any slip below this level will inflict more weakness in the markets. A continued 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)