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Trade setup: Nifty50 likely to ring in New Year on a tepid note; 12,100 level key

The domestic stock market ended 2019 on a bearish note, as NSE Nifty slipped below the 12,200 level on Tuesday. The headline index opened in the red and traded sideways for most part of the session. The selling pressure intensified during the last hour with the index ending 87.70 points or 0.71 per cent lower at 12,168.45.

For December, the 50-stock pack logged a net gain of 112.40 points or 0.93 per cent.

Nifty has shifted its resistance lower to 12,250-12,300 from the 12,350 level. It is highly likely that the rally has temporarily halted.

We expect the market to consolidate for some time before staging a rally. Upside will remain capped in the immediate short term at around 12,300, unless this level is taken out convincingly.

The price action of the index against the 12,100 level is crucial.

On Wednesday, the market may ring in New Year on a tepid note. While some mild technical pullbacks are likely, 12,210 and 12,245 levels will act as strong resistance. Support may come in at 12,105 and 12,030. In the event of further correction, trading range may get broader than usual.

The Relative Strength Index (RSI) on the daily chart stood at 55.52 and stayed neutral, showing no divergence against the price. The MACD has shown a negative crossover and was now bearish, trading below its signal line. An ‘Evening Star’ pattern was formed on the charts. This pattern, if emerges during an upmove near the high point, can potentially mark a temporary top for the market. However, this will need confirmation over the coming sessions.

As per pattern analysis, Nifty broke out above the 12,103 level, which still remains valid. However, the index is showing signs of exhaustion after breaking out and resuming rally after suffering a throwback a couple of sessions ago.

The F&O data showed that 12,300 can act as stiff resistance in case of the market again staging a rally. Nifty support has also shifted lower from the 12,200 level.

We see the market remaining extremely vulnerable at higher levels. We would again advise traders to approach Dalal Street with caution and avoid aggressive purchases during correction.

(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])

Source: Economic Times