Trade Setup: With no cue from Wall Street, Nifty may look up

In a volatile, but rangebound session of trade, the domestic equity market consolidated and attempted to find a short-term bottom for itself on the anticipated lines. Nifty opened positive, but soon slipped into the red in the initial minutes of trade.

However, after hitting the low of 11,251 in the first hour of trade, that low stayed defended throughout the day. The index soon pulled up, but continued to oscillate in a narrow 50-point range throughout. After losing some ground, the last hour of trade saw a smart pullback, which dragged Nifty into the positive towards the high point. The headline index finally ended the session with a net gain of 21.20 points, or 0.19 per cent.

US markets were closed on Monday on account of the Labor Day weekend. Because of this, there will be no overnight cues. With no negative technical development expected overnight, Nifty is likely to make an attempt to move towards the Double Top in the 11,400-11,430 zone. The market breadth has seen some improvement. However, Nifty will have to work hard and move beyond the 11,430 mark to rise above the Double Top resistance area and see incremental gains. Volatility subsided a bit; and India VIX declined 2.44 per cent to 21.6100.


Tuesday’s session is likely to see a stable start. The 11,400 and 11,445 levels are likely to act as key resistance points, while supports will come in at 11,300 and 11,255 levels.

The Relative Strength Index, or RSI, on the daily chart stood at 51.81; it remains neutral and does not show any divergence against price. The daily MACD is bearish and trades below its signal line. A small hammer occurred on the candles. This is more like a candle with a long lower shadow, as it has a upper shadow as well.

Nifty currently trades out of the upward rising channel and also below the Double Top resistance point at 11,430. All in all, we can expect the consolidation to continue for some more time with the 11,430 level being a crucial point. For Nifty to recover and resume its upward move, it would be of paramount importance for the index to move past the 11,430 mark. Until this happens, Nifty will continue to oscillate in a defined range. We recommend avoiding aggressive shorts unless Nifty slips below the 11,250-11,225 zone. One should remain stock specific, make selective buying and protect profits 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)