Trade setup: Nifty needs to top 12,430 for sustainable breakout

The domestic equity market rose for a second straight day on Friday despite opening on a negative note. The session remained largely stable, with the index getting stronger as the day progressed. The headline index finally ended with a gain of 67.90 points or 0.56 per cent at 12,248.25.

The headline index, which has remained in a broad consolidation zone, averted weakness as it took support at 50-DMA at 12,119. In the previous session, the index had crawled above the short-term 20-DMA at 12,216.

While Nifty is trading in the broadening formation, it is yet to achieve any breakout. The 12,200-12,120 zone will be a crucial support over the coming days.


Monday’s session is likely to see a tentative start, with 12,290 and 12,335 levels acting as resistance. Supports may come in at 12,200 and 12,150.

The Relative Strength Index (RSI) on the daily chart stood at 56.65 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. A white body emerged on the candles.

As per pattern analysis of the daily chart, Nifty is in the broadening formation. While the index has not achieved any breakout, it has managed to avert weakness by hanging on to its 50-DMA on a closing basis.

For any sustainable breakout, Nifty needs to move past the 12,400-12,430 zone convincingly.

At present, the index is resisting pattern resistance that exists in the form of a rising trend line. Unless these levels are penetrated and the trend line breached on the upside, Nifty will continue to stay vulnerable at higher levels.

The market is likely to remain stock-specific and outperformance may be limited to defined pockets. We would again advise traders to avoid high exposures and continue to protect profit at higher levels.

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