Trade Setup: 11,500-11,615 resistance for Nifty, sector rotation to continue

The week began on expected lines on Monday. In the previous technical note, we had mentioned about the possibilities of the market opening higher and Nifty pushing itself on the upside. Monday’s session saw Nifty opening on a higher note and getting stronger as the day progressed.

The afternoon session saw some gains being given up, but the index recovered again towards the end. Nifty was not able to reach near the high point but managed to protect most of its gains. The headline index ended with a net gain of 86.40 points or 0.76 per cent.

Once again, Nifty attempted a breakout above the double top resistance zone of 11,400-11,430. The index ended above this point and as long as it keeps its head above 11,430, this breakout shall stay in force. With Monday’s gains, Nifty also tried to penetrate and break above the falling pattern trend line which initiated from 11,800 and joins the subsequent lower tops. Even if the market consolidates, the level of 11,400 has again become crucial to watch. As expected, volatility spiked as INDIA VIX surged 7.38 per cent to 19.7050.


Tuesday's session will see the levels of 11,500 and 11,615 act as resistance points, while support will come in at 11,445 and 11,380 levels.

The Relative Strength Index (RSI) stands at 57.37; it has once again marked a new 14-period high, which is a bullish signal. The RSI is neutral and does not show any divergence against price. The daily MACD has shown a positive crossover. It is now bullish and trades above its Signal Line.

A rising window occurred on the candles. This is a second gap that has emerged during the last three sessions which makes the ongoing trend even stronger.

With Nifty moving past the 11,400-11,430 double top resistance point, in the event of any consolidation, these levels are expected to extend support. In the near term, this zone would be crucial to focus on if any corrective moves occur.

We have seen a clear sector rotation on expected lines and such trends will continue to persist in the market. Like IT was expected to outperform, we will also see continued shift of focus on other defensive stocks like consumption and pharma. However, some consolidation in the broad range and some profit taking bouts from higher levels cannot be ruled out. We recommend avoiding shorts and continue guarding 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)