Wednesday Trade Set-up: The Zone of 11710-11760 To Pose Stiff Resistance; Selective Approach Advised
The major part of the session traded on anticipated lines as the markets remained in a capped range with a negative bias. After witnessing a quiet start to the day, the index moved in a capped range after paring initial gains and slipping in the negative territory. The corrective bias of the markets was evident, and the NIFTY looked much weak with market breadth remaining negative. It was the last hour of the trade which saw a surprise upsurge led by short covering. The index not only erased its modest gains but went on to end the day on a positive note. The benchmark NIFTY50 settled the day with gains of 67.45 points (+0.58%).
In our previous note, we had pointed out that the Monday’s high point of 11710 will act as immediate resistance point for the markets. Despite a strong pullback on Tuesday, this level was not taken out. It was sort of an inside day for the markets with the lower high and higher bottom. Therefore, the level of 11710 still remain an important level that needs to be closely watched.
Wednesday is likely to see the levels of 11710 and 11760 acting as stiff resistance points for the markets. Supports come in much lower at 11610 and 11480.
The Relative Strength Index (RSI) on the daily chart is 65.8895; it remains neutral and shows no divergence against the price. However, pattern analysis over longer term continues to show RSI negatively divergence against the price by marking lower tops when the NIFTY was rising. The daily MACD is bearish and it trades below its signal line. Apart from the white candle that was formed, no important formations were observed on Candles.
Markets are likely to see heightened volatility over coming days and it is likely to remain range bound. Oscillations may limit themselves in the 11710-11760 zones on the higher side and all moves towards these levels will bring increased vulnerability of the NIFTY once again seeing volatile profit taking bouts. The elevated levels of the markets, the Brent crude trading at 2019 highs gaining nearly 30% this year and weaker Rupee over past couple of sessions cannot be ignored. We reiterate continuing to maintain a defensive stance and approach the markets in highly stock specific way.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)