Trade setup: Nifty is vulnerable to profit taking at higher levels

The domestic equity market corrected on expected lines on Monday, as Nifty50 index fell 102.65 points or 0.90 per cent to 11,354.25.

There are indications that index’s corrective bias is likely to persist for more time. Though a start is expected on Tuesday, market is all set to extend its downside. Any upside, will see profit taking at higher levels.

Tuesday’s session is likely to see 11,400 and 11,465 levels act as immediate resistance, while supports are expected to come in at 11,310 and 11,220.


The daily RSI stood at 63.1882 and it has just broke below from a topping formation, which is bearish. The RSI did not show any divergence against the price. The daily MACD remained bullish, but it was seen narrowing its trajectory sharply.

On the candles, a falling window occurred. This usually occurs after a gap-down and often results in continuation of the bearish trend. The two candles preceding the falling window were black, which makes this pattern even more bearish.

The pattern analysis of the daily charts showed that Nifty has achieved implied measurement targets following its breakout from a formation. It has exhausted its upmove and is now showing clear corrective intent.

All in all, even if we witness any upmove during the day, we strongly suggest ignoring them. Any rise should be used to protect profit at higher levels.

Rotation is expected to be visible in defensive stocks, which perform well when rupee weakens. Apart from this, no visible outperformance is expected.

We advise traders to stay away from buying on dips and keep a cautious view on the market.

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