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Trade setup: Nifty50 will adjust to weak global cues; 200-DMA key

The domestic stock market on Wednesday attempted a pullback and tried hard to form a temporary base, resisting weak technical setup. The NSE Nifty ended with a strong gain or 103.55 points or 0.95 per cent at 11,029.40.

The market witnessed a technical pullback after forming a low of 10,782. The pullback got halted at the 200-DMA, which existed at 11,174. The headline index has created a trading zone between the 11,174 level on the higher side and support at 10,782.

With broader setup continuing to remain challenging, the 200-DMA has become a major resistance point.

Indian market will open on Friday after a trading holiday for Independence day, and it will adjust to the global setup, which is structurally weak. We see a lower opening with Nifty remaining more fragile than its peers.

On Friday’s session, 11,075 and 11,140 levels will act as resistance, while supports may come in at 10,980 and 10,935.

The daily Relative Strength Index (RSI) stood at the 41.29 level and remained neutral, showing no divergence against the price. The daily MACD displayed a positive crossover and was bullish, trading above its signal line.

The Friday’s session is likely to see volatility remaining ingrained in the trading. The moves may stay within a broad range, but volatile oscillations on either side cannot be ruled out.

Given the broader technical setup remaining weak, upmoves will remain vulnerable to selloffs at higher levels.

We again advise traders to avoid aggressive long positions as long as Nifty trades below 200-DMA. A cautious approach is advised for the day.

(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