Trade setup: Nifty likely to see a soft start; avoid buying on dips

The domestic stock market on Friday traded on a volatility note, as investors reacted to Cabinet portfolios allocation. Nifty Bank moved in a 1,100-point range, while NSE Nifty gyrated over 200 points before finishing with a modest loss of 23.10 points or 0.19 per cent.

The 12,000-12,040 zone has reinforced itself as a critical resistance area. Add to this, we might see market getting sentimentally negative following weaker GDP data and bearish global cues.

We expect Dalal Street to make a soft start and find resistance with each upmove as sentiment may remain cautious and mildly negative.


Monday’s session is likely to see 11,975 and 12,040 levels act as strong resistance points. Supports may come in much lower at 11,850 and 11,780.

The daily RSI stood at 61.6101 and stayed neutral, showing no divergence against the price. The daily MACD stayed bullish and traded above its signal line, as it was seen narrowing its trajectory. A black body was formed, and apart from this, no other formation was observed on the candles.

The pattern analysis of the daily chart revealed that Nifty has not achieved any conclusive breakout even after it marked incremental highs on a closing basis. The 12,000-12,040 zone has now become an intermediate top. Nifty will have to breach this range to get any sustainable breakout.

The Bollinger bands are now over 74 per cent wider than usual, and this may prevent significant sustainable upmove.

Therefore, the probability of the index remaining or returning to its typical range has increased. This may also lead to some corrective activities.

It is likely that outperformance in stocks may remain highly specific and limited to individual pockets.

We recommend traders not to use dips to make aggressive purchases as the technical texture of the market may change over the coming days.

While keeping exposures at very modest levels, a cautious outlook is advised for the day.

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