Trade setup: Tread with caution for now and stay light on positions

The equity market gave up most of the Friday’s gains, as it ended the first session of the week on a negative note, losing 59.40 points or 0.55 per cent. The market traded stable for major part of the session, but it was the last hour of the trade when weakness crept in.

The Nifty’s struggle with the falling trend line pattern resistance continued on Monday. With Nifty not able to move past the critical 10820-10850 zones, it is getting vulnerable to pressures, as it moves into the apex of the broad symmetrical triangle that it has been trading in.

Stepping into Tuesday’s trade, we see possibilities of weakness persisting due to the weaker global picture. In any case, the zones of 10,820-10,850 continue to pose critical resistance to the market. Tuesday will see the levels of 10,820 and 10,850 offering resistance, while supports are expected to come in at 10,740 and then at 10,680 in form of 50-DMA.


The Relative Strength Index (RSI) on the daily chart was 52.8408. It continued to remain neutral showing no divergence against the price. Daily MACD stayed bearish while trading below the signal line. The emergence of a strong black body on candles has once again lent credibility to the pattern resistance.

Pattern analysis shows Nifty continuing to fiercely resist to the falling trend line, which joined the high of 11,170 to the subsequent lower tops. While it continued to remain in a broad symmetrical triangle pattern, it has moved near its apex and has become prone to a sharp move in coming days.

Overall, it is time that we once again tread the market with some caution. Though it currently rests very near to its short term 20-DMA, any weakness will make sure that the Nifty tests its 50-DMA.

Also, with each day with no directional move happening, Nifty is also making itself vulnerable to a sharp move that will lead to resolution to the current pattern.

We recommend staying away from taking any major directional call and avoid heavy purchases. Shorts too should be avoided until market makes any meaningful directional move. While remaining light on positions, preservation of cash with cautious view is advised for the day.

STOCKS TO WATCH: Relatively resilient technical set up was observed in PNB Housing, Sun TV, NBCC, Tech Mahindra, First Source, Infosys, UPL, TVS Motors, BEML, Oil India, Havells and Indigo.

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