Trade setup for Monday: It’s crucial for Nifty to get past 10,275 & 10,300
In our previous daily note last Friday, we had mentioned about the importance of the Nifty moving past the 10,275-10,300 zone to confirm a temporary base. The market remained tentative all though Friday’s session and the benchmark Nifty50 struggled to move past the 10,275-10,300 range and saw retracement once it tested those levels.
The index ended the day with a modest loss of 15.80 points, or 0.15 per cent. While we enter a fresh week, Monday’s trade is likely to see a stable and strong opening ensured by strong global markets. Having said that, the likely strong opening will see the market open above the 10,275-10,300 zone. However, it would be once again critical to see if the market sustains and maintains itself above those levels.
In all likelihood, we will see market defend those levels.
Nifty will see the 10,300 and 10,365 levels pose as immediate resistance on Monday. Supports should come in at 10,210 and 10,140 levels. The Relative Strength Index or RSI on the daily chart stood at 36.4385 and it remains neutral against the price showing no divergence. It is seen taking a pattern support as well.
The daily MACD remains bearish as it trades below the signal line. No significant formations were observed on candles.
Pattern analysis highlights the credibility of the support that is provided by 200-DMA. The Nifty50 tested this level twice during last week and each time it did so, it has defended it as well. In the immediate short term, we believe this level will stay defended and will not see Nifty50 breach this level in the immediate short term.
Overall, as mentioned, despite a stable and strong opening which is likely on Monday, sustenance above those levels and capitalizing on such possibly strong opening will remain key thing to watch for. Moving past 10,275-10,300 zone will get the market back into the rectangle trading channel that it has formed after the recent corrective decline. If this happens, we expect the market to advance towards its next logical resistance of 100-DMA, which stands at 10452. Though cautious, but positive outlook 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 firstname.lastname@example.org)