Trade setup: Nifty manages to hold 100-DMA; may attempt a technical pullback

In a very challenging and volatile session on Tuesday, NSE Nifty struggled to find a base, as it recovered after slipping below its crucial support in the 11,500-11,550 zone to end on a flat note.

There are some classical signals, which show that the index may potentially pull back from the current levels. The 50-stock pack has held on to the support area, which is the confluence zone of important pattern supports. Nifty has also held on to the 100-DMA which is at 11,500. It has formed a bullish candle while adding in net open interest on the derivatives front.

Wednesday’s session is likely to see a flat to a positive start. We may the market attempting to inch higher in the process of pulling back from the current levels.


The 11,610 and 11,680 levels are likely to act as crucial resistance while supports will come in at 11,500 and 11,460.

The RSI on the daily chart stood at 38.7043 and has marked a fresh 14-period low, which is bearish, showing no divergence against the price. The RSI also appeared to be taking support while continuing to remain trapped in a pattern. The daily MACD stayed bearish and it traded below its signal line.

A candle resembling a long lower shadow emerged. It is bullish as it developed near the critical support area. Though the lower shadow is not long enough, the formation signals a continued attempt to form a base and reverse the trend.

While pulling back from the day’s lows, Nifty has ended with a net addition of open interest on the derivatives front. The Nifty PCR stands at the 0.87 level, and this figure indicates oversold conditions in the immediate short term.

With Nifty respecting its 100-DMA level of 11,500 on a closing basis, this will be a crucial point to watch out in the coming days.

As the index keeps its head above this level, we will have higher chances of a pullback up to the levels of 50-DMA which Nifty has broken on the downside.

We strongly recommend traders to avoid shorts. New purchases may be kept stock specific and in modest quantities. A cautiously positive approach 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)