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Trade setup: Nifty50 may extend rally; 10,400 level remains key

In a highly volatile trade, the domestic equity market gyrat..

In a highly volatile trade, the domestic equity market gyrated between positive and negative zones throughout the session on Monday. After oscillating in a defined range, the NSE benchmark Nift y settled with a gain of 40 points or 0.38 per cent.

The index found support near the 10,400 level, as it saw a sharp recovery after making the days low at 10,410.15.

As per technical charts, the Nifty ended near the days high.

The index is likely to see a positive opening on Tuesday, and it may extend the pullback of the last two sessions.

However, this is assuming that there are no overnight negative news flows from the US markets.

The levels of 10,550 and 10,615 are likely to act as immediate resistance area for Nifty on Tuesday, while supports may come in at 10,450 and 10,400.

The RSI on the daily chart stood at 38.3901, and it has marked a fresh 14-period high, which is bullish. The RSI also showed bullish divergence against the price. The daily MACD was seen further narrowing trajectory, but traded below its signal line.

A hanging man pattern was formed on the candles. However, given the present structure on the charts, it did not hold any major significance.

Overall, the Nifty has added net open interest during the current derivative series, and this shows that the market has seen short covering from the lower levels. Some buying was also observed.

There are chances that the market may continue and extend its pullback on Tuesday.

Volatility will also continue to remain high, as India VIX remained at elevated levels, and it is likely to take some time to cool down.

In event of any overnight negative news, the level of 10,400 is likely to continue to extend support. Overall, positive outlook is advised for the day.

STOCKS TO WATCH: Resilient technical set up was seen in stocks of Hindalco, Infosys, Indiabulls Housing Finance, Lupin, Cipla, Wipro, NCC, Ashok Leyland, HCL Tech, Bharti Infratel, MindTree, ICICI Securities, NOCIL and Religare Enterprises.

(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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