Trade setup: Nifty needs to stay above 10,700 level to stabilise

The NSE benchmark Nifty extended losses for a third straight session on Monday and ended with a fall of 57.35 points or 0.53 per cent.

At one point, the index was down nearly 100 points, but buying in the second half pushed up stocks a bit, as Nifty managed to hold on to its 50-DMA at the close.

The market continued to remain in the present area formation, and with the range getting narrower, the negative bias is weighing heavily on the index.

We expect a flat start to the trade on Tuesday, but maintaining level above 10,700 will be important for Nifty. The 50-DMA, which is at 10,717 will continue to remain an important support to watch for at the close.

Tuesday is likely to see the levels of 10,800 and 10,855 acting as immediate resistance. supports may come in at 10,695 and 10,640.

1

The Relative Strength Index (RSI) on the daily chart stood at 47.9280 and it continued to remain neutral showing no divergence against the price. The daily MACD was bearish, as it trades below its signal line. No significant formations were observed on the candles.

As per pattern analysis, Nifty exhibited a weak bias and mildly broke down from this formation intraday. However, it pulled itself back and remained on the support of the lower rising trend line of the present formation on the charts.

Overall, though we expect a quiet start to the trade on Tuesday, the opening levels and the trajectory that Nifty forms after the opening would be crucial.

We expect volatility to persist as the index remained trapped between its DMAs. It has taken support at its 50-DMA at the close, which was at 10,717 and remained below its 200-DMA and 100-DMA, which are at 10,805 and 10,848 respectively.

We recommend avoiding heavy exposures on the either side. Stock-specific outperformance will remain. The session will remain highly sector and stock specific as the sectoral indices remained in a narrow congestion zone. We suggest to remain light on exposures and also protect profits at higher levels.

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

Source: Economic Times