Trade setup: No runaway move ahead, Nifty’s immediate top at 12,000-12,100

The 12,000-12,100 zone turned out to be a wall-like resistance once again as Nifty finally showed signs of correction after struggling around this area for a couple of days. On Friday, the market opened on a modestly negative note, but traded with limited losses in morning trade. There was a recovery in early afternoon trade when Nifty managed to recoup morning losses and traded in the positive territory, moving past the 12,000-mark.

The index failed to sustain above its overhead resistance zone and succumbed to a strong wave of profit-taking. Nifty came off nearly 150 points from the high point before ending with a loss of 103.90 points, or 0.86 per cent.

Nifty has nearly confirmed the 12,000-12,100 zone as immediate top once again. Friday’s move increased the possibility of the market spending some more time below this zone and trade with some corrective bias. Given the stiff resistance that the market encountered at higher levels, any runaway move is unlikely in the immediate short term.


There is a higher technical possibility that Nifty would either consolidate in a broader range again or show some retracement with a corrective bias. Nifty may see a tepid start to Monday’s session with the 11,970 and 12,050 levels acting as immediate resistance points. Supports will come in lower at 11,835 and 11,750 levels.

The Relative Strength Index (RSI) on the daily chart stood at 64.62. It remains neutral and does not show any divergence against price. However, the RSI has just crossed below the 70 mark from the overbought area, and this is bearish signal. The daily MACD trades above the signal line, but it is narrowing its trajectory.

A big Black Body has occurred on the charts. The occurrence of such a candle near the overhead resistance in the 12,000-12,100 zone reinforces this area as stiff resistance for the market over the coming days.

Pattern analysis of the daily chart showed the Nifty has faced resistance at the lower top levels of 12,000. While doing so, it has continued to show weakness on the lead indicators on short-term charts as well.

The corrective move that we saw in the previous session has come with the shedding of net open interest. Similar other F&O data also suggests that the market saw long unwinding and profit taking at higher levels. This has increased the possibility of Nifty staying below its life-time high for some more time. We recommend staying highly stock-specific and approach the market with caution.

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