Trade setup: Expect a tepid start to Monday’s trade; 9,200-9,245 levels key

Indian equity market remained in an area formation, but it snapped the technical pullback and ended Friday’s session on a negative note. The market saw a negative opening, but managed to recover bulk of the opening losses by afternoon trade.

However, the recovery did not sustain, and Nifty again turned vulnerable at higher levels. The index pared the recovery and fell near the low point of the day.

Except that for Reliance, which supported the index, the weakness was across the board. Nifty ended the session with a loss of 159 points, or 1.71 per cent.

Nifty remained in the Rising Wedge formation as it moved towards the lower support line, which is rising in nature. Any breach of this line will resolve the current pattern with a resumption of the downward move. Given the current structure and rising nature of the lower rising support trend line of the Wedge, it would be crucial to watch Nifty’s price action against the 9,050-9,100 zone. Volatility, which halved from its peak, has also made room for negative implications on the chart.

Expect a tepid start to Monday’s session with the 9,200 and 9,245 levels acting as resistance points. Support will come in at 9,080 and 9,000 levels. The Relative Strength Index (RSI) on the daily chart stood at 48.87; it remains neutral and does not show any divergence against the price. The daily MACD remains bullish as it trades above the signal line.

However, the slope of the histogram is declining mildly, which highlights deceleration of the momentum. No significant formations were observed on the candles.

Pattern analysis showed Nifty remains within the Rising Wedge formation. It has moved lower towards the support trend line, which is rising in nature. Any violation of the lower boundary of the wedge will have negative technical implications on Nifty charts.

The coming week is a truncated one, and April series derivative contracts will expire on Thursday. The market is likely to exhibit a cautious and tentative bias throughout the week. This is likely to limit any upside, if at all it occurs. We strongly recommend not chasing up-moves, if any, and keeping exposures limited to the defensive sectors, which are showing resilience in the current market condition. While continuing to protect profits at higher levels, a cautious outlook is advised for the day.

(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)