Trade Setup: Nifty may try to hit 11,700, focus on defensive stocks

The domestic equity market staged yet another strong up move as it opened higher, got stronger as the day progressed and ended piling up decent gains. Following overnight weakness in US Dollar and continued risk-on setup, the market saw a gap-up opening in the morning.

With a sideways trajectory throughout the day, Nifty kept oscillating back and forth in a limited range. It was the last hour-and-a-half that saw the index getting stronger. Nifty went on to end near the high point posting net gains of 159.05 points or 1.38 per cent.

The strikes of 11,500 and 11,600 saw maximum unwinding of Call Open Interest (OI) during the day, indicating that the conviction of market participants was not going below these levels. That said, Nifty has recovered more than what it had lost in the recent corrective move. The index appears a bit stretched on short-term parameters.

However, the present technical setup suggests that it would not be a surprise if Nifty makes an attempt to scale 11,700. At the same time, it would be prudent to stay extremely vigilant at current levels and guard profits.


Wednesday’s session is likely to see the levels of 11,700 and 11,745 as overhead resistance points, while support will come in at 11,580 and 11,535 levels.

The Relative Strength Index (RSI) on the daily chart is 61.86; it has again marked a new 14-period high, which is a bullish signal. The RSI is neutral and does not show any divergence against price. The daily MACD is bullish as it trades above the Signal Line.

Apart from a white body that occurred, no other significant formation was observed on the candles.

Nifty has not only taken out the double top resistance zone of 11,400-11,430, it has also broken above the falling trend line resistance which began from 11,800 levels and joined the subsequent lower tops. It would not be a surprise if Nifty attempts to take out 11,700 levels.

However, from the present levels, blindly chasing the up move would make the risk-reward ratio unfavorably skewed. We recommend traders to guard profits vigilantly at higher levels and continue focusing on defensive

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

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