Trade setup: Any Nifty upmove to remain limited; stay cautious

In a rangebound session on Friday, NSE Nifty did not make any substantial headway on either side and spent the entire day in a capped range before ending with a minor gain of 13.15 points or 0.11 per cent at 11,891.

The NSE index moved past the 11,700-11,750 zone on the daily charts and has become mildly overbought on a few leading indicators. However, it is yet to break out on the weekly charts.

We expect a soft start to trade on Monday, with the market not expected to see any runaway rally without some consolidation at the higher levels.


Monday’s session is likely to see 11,920 and 12,000 levels act as resistance. Supports may come in at 11,810 and 11,775.

The Relative Strength Index (RSI) on the daily chart stood at 69.75 and marked a fresh 14-period high, which is bullish. The daily MACD stayed bullish and traded above its signal line. The PPO stayed positive. Spinning top pattern emerged on the candles once gain, indicating indecisiveness of the bulls.

The pattern analysis of the daily charts points towards likely stalling up the upmove and consolidation. The leading indicators are mildly overbought, and this may cause Nifty to consolidate in a defined range.

The Bollinger bands are over 40 per cent wider than usual, which suggests higher volatility.

There are possibilities that the volatility would decrease, and this would bring the headline index back in its normal range. Unless a clean breakout is achieved on the higher time frame charts, Nifty will remain prone to profit taking.

We reiterate cautious view on the market and recommend traders to chase momentum cautiously.

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