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  • Milan Vaishnav, CMT, MSTA

Wednesday Trade Set-up: Use Upsides For Protection of Profits; Blind Chase of Momentum Be Avoided

Markets put up a strong show and posted much better-than-expected performance on Tuesday as it went to end with decent gains. After a tepid start to the trade and trading in the negative territory in the early morning trade, the markets saw a change in its trajectory and started moving higher. It got even stronger on back of secular buying across the board though the IT pack remained an exception. The headline index finally ended the day on a strong note gaining 123.95 points or 1.14%.

Wednesday’s trade remains important for the Markets. The NIFTY has moved past the 200-DMA which is presently at 10863 and has ended well above that. On the other hand, it has halted its up move exactly at the multi-month resistance area formed over past couple of months.

Though we expect a stable start to the trade on Wednesday, the opening levels and the intraday trajectory that the Markets form post opening will be crucial to watch for. In event of any consolidation creeping in once again, the zone between 200-DMA and 50-DMA would lend support.

Wednesday is likely to see the levels of 11040 and 11100 acting as resistance points. Supports come in at 10900 and 10860 levels

The Relative Strength Index (RSI) on the daily chart is 60.5738; it has marked a fresh 14-period high which is a bullish sign. It does not show any divergence against the price. The daily MACD stays bullish and trades above its signal line. A big white body emerged on candles.

The pattern analysis on the daily charts show the NIFTY now trading above all its key moving averages. Though it has moved past the averages, it has halted its up move near the multi-month resistance points that are created over past couple of months.

All in all, since the NIFTY has ended near the high point of the day, a stable opening on Wednesday cannot be ruled out. However, in the current up move, it has completely disregarded the existence of 200-DMA and never resistance even once can warrant some caution at higher levels.

There are possibilities that we might see some consolidation setting in once again. We the zone of 200-DMA and 50-DMA acting as support zone, it will not be a surprise if we some consolidation creeping in. However, if the NIFTY continues with its up move, all upsides should be used more protect profits while continuing to keep exposures at modest levels.

Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)