Trade setup for Monday: Nifty may witness some consolidation, avoid aggressive purchases

Contrary to what was expected, the Fridays session remained quite a stable one and the benchmark index Nifty50 saw a one-way upsurge. The index ended the day with gains of 116.10 points or 1.03 per cent. With absence of volatility in the Fridays trade, the India VIX ended at fresh low at 12.0775 losing 3.80 per cent. The upmove remained across the board as all broader indices and the sector indices ended with gains.

As we approach fresh week beginning Monday, though we expect a modestly positive start to the trade, Nifty is staring at some imminent consolidation at higher levels. Though we may see market advancing gains and inching higher towards higher levels, at any point, we may be faced with rangebound consolidation and some profit taking from higher levels.

Monday will see the levels of 11,385 and 11,430 acting as immediate resistance area.

Supports come in at 11,290 and 11,210 zones. The range has become wider for the Nifty over recent days with technical supports drifting lower.

The Relative Strength Index – RSI on the Daily Charts is 70.1311 and it gets slightly overbought again on the charts. A bearish divergence is also observed as the Nifty has marked a fresh 14-week closing high while RSI did not.

Daily MACD continues to remain bullish while it trades above its signal line. Pattern analysis shows that Nifty is attempting to move higher after a very brief consolidation after testing highs of 11,390. Though this level may still pose resistance to the market, any upmove will lead the market to get further overbought again.

Given the present pattern and structure on the charts, it would be healthy if the Nifty consolidates a bit more despite the overall trend remaining intact and buoyant. Overall, a modestly positive start to the trade is expected and we may see Nifty attempting to scale higher.

However, we still reiterate to exercise extreme caution a higher level because despite overall buoyant setup on the charts, the Nifty still looks imminently susceptible to corrective moves from higher levels which may force it into some more consolidation. We recommend avoiding aggressive purchases and protect profits at higher levels. A cautious view on the market is advised for the day.

STOCKS TO WATCH: Long positions were seen being added in stocks like PNB, National Aluminum, SBI, L&TFH, ITC, Canara Bank, Tata Steel, Arvind, PTC, Axis Bank, ICICI Bank and DLF.

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

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