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Trade setup: Nifty50 to stabilise if it is able to defend 10,816 level

The NSE benchmark Nifty turned weak in the last hour of the trade on Tuesday and ended in the negative zone for the third day in a row.

After a soft start, the session remained extremely rangebound and the market headed nowhere. Nifty settled the day with a loss of 57.40 points or 0.53 per cent.

In Tuesday’s trade, Nifty slightly slipped below the 200-DMA, which was at 10,858. However, it has rested at the 50-DMA, at 10816, after taking support near to this level.

Though a stable start to the trade is expected, holding on to 50-DMA will be extremely important. Any breach of this level will open some more downsides.

The support zone of 10,816-10,858, which is made of two important DMAs — 50 and 200 — is important in the near term and breach of this zone will invite some short-term weakness.

Wednesday will see the range of 10,850 to 10,945 levels acting as immediate resistance area. Supports may come in at 10,800 and 10,710.

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The Relative Strength Index (RSI) on the daily chart stood at 48.3610, and it continued to remain neutral, showing no divergence against the price. The daily MACD continued to remain bullish and traded above its signal line. No significant formations were observed on the candles.

The pattern analysis revealed that Nifty failed the breakout, which it attempted by moving past the 10,950 level. In what was seen as a throwback, the index actually failed that breakout and returned inside the broad range again.

All in all, the index at present remains in a no-trade zone. However, the bias remains positive, as Nifty has not shown any structural breach on the charts.

We recommend remaining light on overall exposures and keeping positions modest. Liquidity should be preserved and exposures should be taken on a very selective basis, as the market breadth continues to remain a concern.

(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