Trade setup: Nifty may continue bearish trend till it tops 11,550

The domestic stock market traded on anticipated lines, as NSE Nifty gave up opening gains to end 100.35 points or 0.87 per cent lower.

The index breaching the 11,550 level is a significant technical development. Along with Nifty closing below the lower Bollinger Band, which opens up the possibility of a further downside after some temporary pullback, the 11,550 level is now very important level to watch.

The behavior of the index vis-à-vis this level will dictate the trajectory not only for Wednesday but also for the coming sessions.


Wednesday’s session is likely to see 11,550 and 11,625 level act as resistance points. Supports may come in at 11,460 and 11,380.

The Relative Strength Index (RSI) on the daily chart stood at 45.0740 and it has marked a fresh 14-period low, which is bearish. The daily MACD is bearish and it traded below its signal line.

A big engulfing bearish candle emerged on the charts. The real body of this pattern engulfed the body of the previous candle. This candle is larger than average size of the candle and marks the bearish undertone of the trading day. It has also established its high point of 11,650 as a temporary resistance point.

The short-term technical structure will get predominantly bearish if Nifty does not crawl back above 11,550.

We again advise traders to stay away from making aggressive purchases and continue to adopt a highly cautious view.

Few intermittent pullbacks are expected, but unless Nifty trades above 11,550, these rebounds will remain temporary and vulnerable to volatile selloffs at higher levels.

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