Markets

Trade setup: Nifty vulnerable at higher levels; protect your profit

In a surprise move, the domestic equity market surged higher on Monday and closed at a fresh lifetime high. The rally was driven by a drastic fall in crude oil prices and hopes of a rate cut by the RBI this week.

NSE Nifty ended with a gain of 165.75 points or 1.39% per cent.

The market has ended on a strong note and we can expect some follow up moves as we approach Tuesdays trade.

However, going ahead, the risk-reward ratio has gotten heavily skewed and unfavorable for new purchases.

With Nifty open interest PCR nearly overbought, we reiterate not getting carried away and advise using all upmoves to protect profits.

Tuesdays session is likely to see 12,120 and 12,160 levels act as resistance. Supports may come in lower at 12,010 and 11,900.

The Relative Strength Index (RSI) on the daily charts stood at 66.4548 and it has marked a fresh 14-period high, which is bullish. The daily MACD continued to trade above its signal line.

After Mondays move, the Bollinger bands have got over 86 per cent wider than normal. This is highly unusual for the index. The large width of the bands suggests high volatility compared with Niftys normal range.

Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The likelihood of prices consolidating into a less volatile range grows the longer the bands stay in this wide range.

We advise traders not to get carried away with sucRead More – Source
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