Markets

Trade setup: Nifty needs to cross 100-DMA, may consolidate ahead

Indian stock market on Monday witnessed a strong opening, but failed to capitalise on early gains, as the NSE benchmark Nifty pared gains to trade in the negative zone. The second half of the session saw rangebound moves as the index ended with a minor gain of 7 points or 0.06 per cent.

In the previous market note, it was mentioned that the Nifty was likely to see some consolidation. This was expected, as the index was approaching its overhead resistance area of 100-DMA, which also happens to be one of the important pattern resistances.

For Tuesday, we expect this consolidation to continue and see all the upsides remaining capped. The 100-DMA of Nifty, which is at 10,958, will continue to post immediate resistance.

Tuesday is likely to see the levels of 10,960 and 10,995 giving stiff resistance to any upmove. Supports may come in at 10,840 and 10,765 zones.

The Relative Strength Index (RSI), on the daily charts stood at 62.5408. RSI has marked a fresh 14-period high, which is bullish. The daily MACD stayed bullish as it traded above its signal line. PPO remained positive as well.

Apart from the black body that was formed, no significant formations were seen on the candles.

As per pattern analysis, it is evident that Nifty has successfully managed to move out of the falling channel that it had created. However, in the process, it did move past its 200-DMA, but its upmove is seen getting stalled at its 100-DMA, which is at 10,958. This means that the fresh upmove will be seen only after Nifty moves past the 100-DMA mark.

Overall, as shown by the F&O data and by the technical structure on the charts, the underlying sentiment remains buoyant and the undercurrent remains intact.

However, in the immediate short term, we might see some consolidation. The market will also have its eye on the RBI policy review due on Wednesday.

We continue to recommend approaching market with caution. No major downsides are expected, as undercurrent remain buoyant, but Nifty will continue to see profit taking at higher levels as long as the 100-DMA level is not taken out.

Cautious and stock specific approach 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 milan.vaishnav@equityresearch.asia)

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