Trade setup: Nifty behaviour vis-à-vis 100-DMA at 11,408 to decide its next course

Markets tried hard to move past its important resistance points in Tuesday’s session, which remained stronger than expected. The market saw a positive start to the day and then logged gains as the day progressed.

Nifty tried to move past the 100-DMA, which currently sits at 11,408. However, throughout the day, the market lacked the strength and conviction required for a sustainable upward move. After coming off the high point of the day, Nifty ended 87.15 points, or 0.77 per cent, higher.

The 100-DMA, which currently sits at 11,408, was an important resistance point just as the 200-DMA supporting Nifty on the downside. The market is currently in this range, and Nifty has closed a notch above the 100-DMA.

Some incremental gains cannot be ruled out, but much would depend on Nifty’s price behaviour against the 11,408 mark. Any slip below this will push the market into consolidation again.

While a stable start is expected on Wednesday, the 11,460 and 11,510 levels will act as key resistance points, while supports will come in much lower at 11,360 and 11,280 levels.

The Relative Strength Index (RSI) on the daily chart stands at 56.95; and it remains neutral without showing any divergence from price. The daily MACD remains bearish and trades below the signal line.

Pattern analysis of the daily chart showed Nifty has been trying to push above the falling trend-line drawn from the 11,700 level. However, it lacks the firm conviction required to move past this level sustainably. Nifty has formed a congestion zone between the 200-DMA and 100-DMA, and it is attempting to break above it.

It would be interesting to see where the Nifty opens on Wednesday, the trajectory it forms post opening trade and its behaviour vis-à-vis the 100-DMA level at 11,408. In the event of any up-move, one may chase it prudently, but do remember to protect profits at higher levels. A cautiously positive outlook is advised for the day.

(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)