Trade setup: Nifty50 to face stiff resistance at 10,820-10,850 levels
In our previous note, we had said that the zones of 10,820-10,850 may provide stiff resistance. On the analysed lines, the Nifty opened positive, saw short covering during the day, posted days high at 10,850.55 and saw itself paring much of its intraday gains.
The NSE benchmark Nifty ended with a gain of 19.30 points or 0.18 per cent, coming off nearly 65 points from days high.
As we enter Tuesdays session, expect the zones of 10,820-10,850 continuing to offer stiff resistance. A quiet start is likely, but unless the levels of 10,850 are breached on the upside, Nifty will continue to remain vulnerable to corrective actions at higher levels. Tuesday will see the levels of 10,820 and 10,850 acting as immediate resistance area. Supports may come in at 10,745 and 10,710 zones.
The Relative Strength Index (RSI) on the Daily Chart is 59.3566. It has marked a fresh 14-period high which is bullish. It does not show any divergence against the price. The Daily MACD is bullish as it trades above its signal line. On the Candles, a Shooting Star emerged. This formation is significant in the present scenario as it has occurred after an up move and near a pattern resistance area. This can potentially throw the market into some consolidation or minor corrective move once again.
Pattern analysis shows that Nifty resisted precisely at the falling trend line resistance area. This trend line is formed by joining each subsequent falling tops after 10,179 mark.
Overall, Tuesdays trade may not see any runaway upmove. Unless the level of 10,850 is breached on the upside, we will see each up move getting stalled in the 10,820-10,850 zones. We continue to recommend making fresh purchases at lower levels with and make use of each corrective move, however, it would be critical to remain highly stock and sector specific in the approach.
Also, on the other hand, while adopting a cautious view on the market profits should be guarded at higher levels.
STOCKS TO WATCH: Relatively better technical set up is observed in stocks such as NCC, Orient Paper, Triveni, Jindal Stainless, Dalmia Bharat, PI Industries, HDIL, Zee Entertainment, TV18 Broadcast and Tech Mahindra.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)