Trade Setup: 11,300-11,350 zone stiff hurdle for Nifty, as is a dollar rebound

Indian stocks continued to post incremental gains on Monday, but the indices came off before ending the day with modest gains. The market saw a better-than-expected opening for the day. After starting on a positive note, the indices got stronger as the session progressed. However, after marking the peak in early afternoon trade, Nifty came off over 80 points from the high point of the day. The last hour saw the index trade rangebound. The headline index finally ended with a modest gain of 56.10 points, or 0.50 per cent.

Nifty’s broad technical setup appears to be stable. However, the 10,300-10,350 zone continues to pose stiff resistance to the index. Though the market may remain broadly stable, these levels need to be watched closely. Nifty may also be affected along with its Asian peers if the US dollar, which is grossly oversold, posts a mild technical rebound, which can make emerging markets to take some breather from the current dream run.

Volatility index INDIA VIX came off slightly by 0.30 per cent to 22.5100.


A few banking and financial stocks along with some liquid and good quality midcaps may also see relative outperformance on Tuesday. The 11,300 and 11,350 levels will act as key resistance, while supports will come in at 11,215 and 11,165 levels.

The Relative Strength Index, or RSI, on the daily chart stood at 64.32. It remains neutral and does not show any divergence against price. The daily MACD remains bearish as it trades below the signal line.

The index remains stable and is exactly in the middle of the rising channel that was formed after the rising wedge formation got resolved in a continuation pattern. Nifty trades comfortably above all the key moving averages with the 200-DMA acting as an important support. The 200-DMA is currently placed at 10,849 level.

Except for the grossly oversold Dollar Index staging a technical rebound, there is no other major threat to the emerging markets in general, and Nifty in particular. The market is likely to continue trading in a broad range. However, the 11,300-11,350 zone will be a stiff overhead resistance. While avoiding aggressive shorts, one may follow the momentum, but protect profits at higher levels.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)