Trade setup: Nifty50 is precariously poised; expect stock-specific action

The domestic equity market managed to hang on to its crucial support levels in Friday’s session, which witnessed rangebound trade. Nifty opened positive, marked an intraday high early in the session, and then stayed in the sideways trajectory throughout the day. The index spent the day, oscillating in a narrow 40-point intraday range but did not take any serious directional cue, though it managed to stay in the positive zone.
The headline index finally ended the session with a modest gain of 59.40 points, or 0.53 per cent. Nifty has a tricky turf to navigate over the coming days. It has not yet penetrated the crucial resistance in the 11,430-11,500 zone and is trading indecisively near the double top resistance. Also, Nifty is hanging on precariously to the lower trend line of the Rising Channel and for the first time in last couple of months, it was seen making a lower high within the channel.

On the other hand, the Dollar Index is showing all signs of a possible technical rebound in the coming days.

Market volatility remained at its lowest point over the past few days. On Monday, the 11,430 and 11,465 levels are likely to act as key resistance for the index, while supports will come in at 11,300 and 11,180 levels.

The Relative Strength Index, or RSI, on the daily chart stood at 62.16. It remains neutral and does not show any divergence against price. The daily MACD remains bearish as it trades below the signal line. Yet another Spinning Top occurred on the candles. The formation of a spinning top indicated discomfort and indecisiveness among market participants vis-à-vis the levels at which index is trading.

Nifty is currently based inside the Rising Channel, but just slightly above the lower trend line. Any violation of this trend line will invite weakness.

All in all, penetrating the 11,430-11,500 will be crucial for the market in the near term, failing which it can slip into consolidation or see a minor correction. On the external front, developments in the AGR case and the Supreme Court’s view of the companies using the spectrum and paying the dues on behalf of the defunct companies may trigger some good moves in the banking stocks.
Apart from this, on a broader note, the market will continue to remain stock-specific. We recommend avoiding aggressive longs until the Nifty decisively moves past the 11,430-11,500 zone.

(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])

Credit: Stocks-Markets-Economic Times

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