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Trade setup: MACD still bearish, Nifty may consolidate bit more

It was widely expected that Nifty may not see any runaway ra..

It was widely expected that Nifty may not see any runaway rally on Friday after the sharp short covering bounce it witnessed in the expiry session on Thursday.

On the expected lines, the last session of the week saw the Nifty opening modestly in the green and spending rest of the session in a falling trajectory. The index ended with a loss of 39.95 points or 0.37 per cent.

As we approach the new week, we expect Nifty to see a modestly positive opening on Monday. The index may also not see any major directional moves on either side. It is likely to trade in a capped range with upsides finding resistance at higher levels.

Some amount of consolidation is now expected to creep in and persist for some time. Monday is likely to see the levels of 10,765 and 10,790 playing out as resistance areas. Supports may come in at 10,650 and 10,605 levels.

The Relative Strength Index (RSI) on the daily chart is 54.9419. RSI remains neutral and it shows no divergence against the price. Daily MACD continues to remain bearish while trading below its signal line. No significant formations were observed on the candles.

If we go by pattern analysis, it shows that the Nifty attempted to break out of the broad trading range that it has formed over past couple of months. However, post an attempted breakout, it is witnessing some throwback. If 10,600-10,630 zones do not lend any immediate pattern support, it may see some more weakness creeping in.

Overall, the Nifty has taken support at its short term 20-DMA, which is at 10,665. Any breach of this level at close will again push the market into more consolidation and minor corrective phase.

Speaking purely on technical terms, there are no triggers apart from the Reserve Bank of Indias monetary policy — slated to be released on Wednesday — that will influence a sharp move in the market.

We recommend remaining very stock specific and chasing momentum in a selective manner while keeping overall exposures at modest levels.

STOCKS TO WATCH: Long positions were seen being added in stocks of ICICI Bank, Tata Motors, PFC, Ashok Leyland, Reliance, Hindalco, TVS Motors, Equitas, Engineers India, Ujjivan, HDFC and Larsen & Toubro.

(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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