Trade setup: Nifty may attempt a pullback, but outlook is bearish

RSI on the daily chart stood at 54.54. It has made a fresh 14-period low, which is bearish.

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Tuesday’s session will see 11,660 and 11,710 levels act as resistance.
The NSE Nifty displayed signs of a failed breakout on Monday, as the index came off 125 points from the day’s high to end 1.35 per cent lower.

Over the past several sessions, Nifty persistently showed bearish divergence against lead indicators. The index defied its usual inverse relationship with VIX, rupee started its downward momentum and crude oil spiked to 2019 highs in global markets. All these factors made a corrective like today’s imminent.

Monday’s downside has reinforced the importance of double top resistance, and has made the 11,760 level an immediate top. Even if Nifty attempts to take support at lower levels and manages some pullback, we expect this corrective pressure to remain.


Tuesday’s session will see 11,660 and 11,710 levels act as resistance. Supports are likely to come in at 11,550 and 11,460.

The Relative Strength Index (RSI) on the daily chart stood at 54.5395. It has made a fresh 14-period low, which is bearish, and showed a bearish divergence against the price. The daily MACD stayed bearish and traded below its signal line. A large black body emerged on the candles.

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This reinforces the double top resistance as an immediate top for Nifty.

The index has closed slightly below its short term 20-DMA. This may result into a mild technical pullback given the fact that the 50-stock pack has come off nearly 260 points from the high point of the previous session.

Despite these mild pullbacks, if there are any, we expect this corrective pressure to persist. We again advise traders to refrain from buying on dips and maintain a very cautious outlook on the market.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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