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  • Milan Vaishnav, CMT, MSTA

Wednesday Trade Setup: NIFTY Takes A Breather; Session May Remain Volatile In A Broad Range

The markets saw a volatile session on Tuesday as the headline index oscillated in a 100-point range back and forth before ending the day on a flat note. After opening on a flat note, the NIFTY made a couple of attempts to put on incremental gains. However, each such attempt encountered supply from higher levels. In the say way, the downsides too, were not sustained, and this kept the markets volatile as well as range-bound. The headline index NIFTY ultimately settled the day with a negligible loss of 12 points (-0.10%)

In the previous note, we had expected the markets to take some breather despite a bullish setup. Much on the anticipated lines, the NIFTY stalled its up-move and has marked a lower high.

Further, the market breadth turned negative, giving indications that the markets may either retrace after gaining over 8% in two days or at least consolidate in a broader range. Unless the level of 11700 is taken out, the NIFTY will either show some retracement or in most likelihood, consolidate in a broad range. In all possibility, the level of 11700 is now a temporary top for the markets unless taken out comprehensively.

A subdued start to the day is likely on Wednesday. We enter the penultimate day of the expiry of the current derivative series. The session is expected to remain rollover focused. Wednesday will see the levels of 11655 and 11700 acting as strong resistance points. Supports will come in lower at 11500 and 11430. The session may see the markets trading in a broader range than usual.

The RSI on the daily chart is 65.19; it stays neutral and does not show any divergence against the price. The daily MACD stays positive and trades above its signal line. The PPO remains positive. A spinning top emerged on the candles; it signifies an indecisive state of mind of the market participants and a lack of directional consensus among them.

There are higher chances of volatility remaining ingrained in the markets. The NIFTY has continued to close outside the upper Bollinger band following a strong breakout. However, the wider-than-usual width of the band may see the NIFTY pulling itself inside the band. We recommend staying away from making aggressive purchases and continue approaching the markets on a very cautious note.

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