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Trade setup for Monday: Karnataka poll results likely to add volatility; watch out for 10,785 level


NEW DELHI: The market attempted a breakout in the Fridays session as it opened positive and continued to trade below 10,785-mark. However, the second half of the session saw the shares gaining strength and attempted to break out of the consolidation zone it created. It ended a notch above the 10,785-mark, gaining 89.95 points or 0.84 per cent.

As we step into the fresh week, we have political event of Karnataka election results which is likely to effect the market and along with this, it will also infuse some volatility in the trade. With various opinion polls predicting a hung assembly in Karnataka, we might see a tepid start to the trade. In any event, with the breakout not yet been confirmed, the levels of 10,785 still continues to remain critical levels to watch for.

Monday is likely to see 10,835 and 10,880 acting as immediate resistance area for the Nifty50 index. Supports will come in at 10,750 and 10,710 zones.

The Relative Strength Index – RSI on the Daily Chart is 67.4812. It shows a bearish divergence as while Nifty marked a fresh 14-period high, RSI did not do so. Daily MACD stays bullish while trading above it signal line. A white body occurred on Candles and apart from this, no significant formations were observed.

Pattern analysis shows that after breaking out of the rectangle formation, the Nifty suffered a minor throwback after marking high of 10,785. After a brief consolidation, the index has attempted to move past 10,785-mark. However, a confirmation to this attempted breakout is awaited.

Overall, apart from the political event of Karnataka election results that is likely to infuse volatility in to the market, the 10,785 continues to remain critical levels to watch for. Unless the 10,785-level is breached on the upside, market may continue to remain under consolidation.

Internal technicals suggest strength and more likelihood of Nifty inching higher. We continue to recommend making selective purchases with any opportunity that expected volatility might offer. Though cautious, positive outlook is advised for the day. However, until the results come out next week, we might see tentative approach prevailing in the market.

STOCKS TO WATCH: Good technical set up is observed in stocks like Vedanta, YES Bank, Hindustan Zinc, CG Power, Nalco, Petronet, Larsen & Toubro, Petronet LNG, Capital First and Bharat Financial.

(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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