Markets

Trade Setup: Nifty likely to start where it left today; hurdles at 11,130 and 11,165

In what can be called a ‘mirror-image’ of the previous session, domestic equities managed to recoup all the losses of the Monday‘s session as it ended on a strong note. The day remained secularly bullish as Nifty stayed on a rising trajectory throughout with no sign of weakness at any point. The session opened on a positive note, and the index grew stronger as the day progressed. It managed to retain higher levels and ended with a strong gain of 211.25 points, or 1.94 per cent.

From a technical perspective, the market has confirmed the pattern support created by confluence of the 200-DMA and the upward rising lower trend line of the channel. The 200-DMA, as of today, stays at 10,856. The 10,856-10,900 region remains a strong pattern support for Nifty now. It is also important to note that out of 211 points, nearly 150 came from just two stocks: RIL and HDFC Bank. Volatility index, INDIA VIX, dropped sharply by 5.98 per cent to 23.6775.

Wednesday’s session is likely to see a stable start, and the 11,130 and 11,165 levels are likely to act as key points of resistance, while supports will come in at 11,030 and 10,950 levels.

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The Relative Strength Index, or RSI, on the daily chart stood at 59.21. It remains neutral and does not show any divergence against price. The daily MACD is bearish, and trades below the signal line.

A large white body emerged on the candles, signalling a strong consensus on the upside during the session. Also, it’s happening near the pattern support, reinforcing its credibility.

Nifty has managed to stay inside the rising channel, which it had formed once the rising wedge was resolved as a continuation pattern. The index has bounced off the lower trend line, validating it as an important support. The 200-DMA, which currently stands at 10,856, remains a major support for Nifty on a closing basis.

The market’s behaviour in general is likely to remains highly stock and sector specific over the coming days. While chasing the momentum, one must vigilantly protect profits at higher levels. A cautiously positive outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

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