Home Market Trade setup: Nifty50 may open on a tepid note; 10,650 level key

Trade setup: Nifty50 may open on a tepid note; 10,650 level key

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Indian equity market consolidated for yet another session on Tuesday, as the NSE benchmark Nifty50 ended with a modest gain of 29.65 points or 0.28 per cent.

On expected lines, the market saw a quiet opening, and just when it started to correct in late morning trade, short covering gave it a lift. Bulk of the short covering was rollover in nature.

Wednesday is the penultimate session of the expiry of the current derivative series. We once again expect a tepid start to the trade. The rollovers will continue to dominate, and we expect the market to trade, while continuing to resist the 10,650 zone.

The levels of 10,650 and 10,695 will act as key resistance zone. Supports will come in lower at 10,585 and 10,510.

The Relative Strength Index (RSI) on the daily chart is 65.4201, and it has marked yet another 14-period high, which is bullish. RSI shows no divergence of any kind against the price. The daily MACD stays in bullish mode while trading above its signal line. No significant formations were seen on candles.

Pattern analysis shows that despite showing buoyant undercurrent, Nifty has not yet achieved a clear breakout from the broad rectangle trading range. A clear breakout will be achieved once the Nifty moves past 10,650 level with some conviction.
Overall, despite buoyant undercurrent, traders should tread the market with some caution.

India VIX has dropped to its lowest value in recent time and the Nifty PCR (Put to Call Ratio) still continues to remain at elevated levels. These factors are likely to keep upmove capped on the upside. In other words, with each upmove, Nifty remains more and more vulnerable to profit taking bouts.

Apart from this, we will continue to see sector and stock specific performances occurring as well. We continue to reiterate to keep protecting profits vigilantly at higher levels while adopting a cautious view on the market.

STOCKS TO WATCH: Good technical set up is observed in stocks like GATI, Snowman Logistics, SBI, Canfin Homes, Bajaj Finserv, Godrej Properties, Reliance, ONGC, Bharat Financial, and RAYMOND.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

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