Trade setup: Nifty50 must move past 10,600-10,710 zone to rally

The stock market made a tepid start to the week on Monday, as the NSE benchmark Nifty stalled its technical pullback. The index opened on a negative note and spent the entire session in a small range.

We had mentioned about the possibility of the market getting pushed into some consolidation, as it approaches the overhead resistance area.

Nifty for the session ended losing 29 points or 0.27 per cent after rebounding a bit from day’s lows.


For Tuesday’s session, we expect a stable start and the consolidation to continue. Nifty is facing stiff resistance in the 10,600-10,710 zone. We expect this area to continuing posing some resistance to the index in the immediate short term. The behavior of the market vis-à-vis this zone is critical to watch out for.

Tuesday is likely to see levels of 10,600 and 10,665 acting as immediate resistance area. Supports may come in 10,475 and 10,420 levels.

The Relative Strength Index (RSI) on the daily chart stood at 50.2965 and it remained neutral showing no divergence to the price. The daily MACD stayed bullish while trading above its signal line. No significant formations were seen on the candles.

If we look at the pattern analysis, Nifty has formed a large trading zone. This is a 600-point wide falling channel with the upper range lying in the 10,600-10,710 zone.

Overall, Nifty not correcting despite a strong pullback over the past couple of sessions is a sign of some strength in the market.

However, despite such behaviour, it is important for the index to move past the 10,600-10,710 zone. Unless this happens, just like Monday, we will continue to see Nifty remaining vulnerable to some weakness and some volatile rangebound oscillations. Cautious outlook is advised for the day.

STOCKS TO WATCH: Long positions were seen being added in stocks such as State Bank of India, Ashok Leyland, Adani Power, ONGC, Tata Motors, Hindalco, Aurobindo Pharma, PVR, National Aluminum, Gail, Reliance, NCC, PFC, Motherson Sumi and Bharti Airtel.

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