Trade setup: Nifty50 needs to top 10,950 level to extend rally

Stock market witnessed a shaky start to the week, as it opened on a softer-than-expected note and traded in the negative territory on Monday.

The NSE benchmark Nifty traded in a falling trajectory until the late aftern oon, though the range remained limited and capped.

It was the last hour and half of trade with saw the index sharply reversing its losses. Nifty finally settled with a modest gain of 18.60 points or 0.17 per cent.


The charts showed that the index has held its immediate support of 200-DMA, which is at 10,846.

Stepping into Tuesday, we expect Nifty to continue to consolidate with positive bias. However, the level of 10,950, which is now acting as a multi-month resistance area will be important to watch out for.

Tuesday is expected to find resistance at 10,950 and 11,085, while supports may come in at 10,840 and 10,790. The Relative Strength Index (RSI) on the daily chart stood at 56.8017, and it has stayed neutral, showing no divergence against the price.

The daily MACD has shown a positive crossover. It was now bullish and traded above its signa line. The occurrence of the third white body in a row on the candles suggest that there were higher chances of the index inching higher and the steady pattern may remain bullish.

While having a look at pattern analysis, it was observed that despite not moving past the all-important 10,950 mark, Nifty has managed to pull itself above all of its key moving averages.

So long as the index is above these key averages, the inherent structure on the charts will remain intact.

All in all, there are enough factors present on the charts, which could see the index inching higher and attempting to move past the 10,950 mark.

However, until Nifty breaches this level on the upside, we will find the market continuing to consolidate and volatility also remaining present in the trade.

Expect the Tuesday’s trade continuing to remain stock-specific and see the possibilities of more consolidation. We recommend avoiding shorts and making modest selective purchase long as Nifty remained above its key moving averages.

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