Trade Setup: Nifty’s behaviour against 14,350 trend-deciding; stay highly stock specific

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Trade Setup: Nifty’s behaviour against 14,350 trend-deciding; stay highly stock specific


In the previous note, it was mentioned that headline equity index Nifty‘s short-term technical structure stands damaged and the resistance points have been dragged much lower. The market saw a negative opening on Thursday and the losses got sharply wider as the day progressed.

By afternoon, Nifty had slipped below 14,300 at one point of time. The second half of the session saw the index attempting a sharp recovery. It managed to recover over 200 points from the lows. However, this recovery was not sustained as Nifty pared all those recovered points. The index settled with a net loss of 224.50 points or 1.54 per cent.

ET CONTRIBUTORS

Because of the monthly derivative expiry and also the weekly expiry of the options, the session stood highly dominated with rollovers as well. From a technical perspective, Nifty’s short-term chart structure stands damaged. Unlike the earlier buy-on-dips theory, we may see sell-on-rise theories playing in the market now.

Nifty has again dragged its resistance down to 14,675 which is in the form of an extended trend line support that the index violated over the past two sessions. On the way up, this would act as a resistance point. Volatility rose modestly with India VIX rising 1.07 per cent to 22.6975.

Friday’s session will see Nifty’s behavior against the 14,350 level extremely important and trend-deciding over the coming days. This is the low formed on 19th March which triggered a sharp short-covering move in the market. Nifty will have to move past this point to avoid weakness. The levels of 14,365 and 14,450 will act as resistance points, while support will come in at 14,280 and 14,200 levels.

The Relative Strength Index (RSI) on the daily chart stood at 38.26; it made a new 14-period low which was bearish. RSI was neutral and did not show any divergence against price. The daily MACD was bearish and stayed below its Signal Line.

A black body emerged on the charts; with open and high on Nifty being almost the same, reflecting the unanimous behavior and the directional consensus of market participants.

Overall, Nifty has a strong support at 14,024, which is the 100-DMA for the index. This level is also near to the 20-week MA at 14,113. So, the zone of 14,000-14,100 represents a very strong support points for the index. Aggressive shorts should now be avoided. We reiterate staying highly stock-specific while making purchases and keep exposures at modest 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)



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