Home Market Trade setup: Nifty charts bullish, but its time to tread with caution

Trade setup: Nifty charts bullish, but its time to tread with caution


The stock market scaled a fresh lifetime high on Monday, as NSE benchmark Nifty inched higher. The index ended with a gain of 41.20 points or 0.37 per cent. The positivity was seen across all sectors barring IT Pack, which retraced its gains. The PSU Bank index showed distinct outperformance among other indices.

Market has successfully given and subsequently confirmed a breakout above the major resistance area of 11,170-11,175.

Tuesday is likely to see a quiet start to the trade and Nifty is expected to extend its gains. However, the index now trades oversold, and will remain vulnerable to retracements at higher levels.

Tuesday will see the levels of 11,350 and 11,385 acting as immediate resistance area. The supports may come in lower at 10,275 and 10,140 zones.

The Relative Strength Index (RSI) on the daily chart was 75.4665 and it has marked a fresh 14-period high, which is bullish. However, it trades in oversold trajectory. RSI shows no divergence against the price. The daily MACD stays bullish while trading above its signal line. No significant formation is observed on the candles.

The pattern analysis confirms the breakout from the immediate resistance area of 11,171-11,175 zones. The Nifty has breached its previous high and has subsequently confirmed this breakout.

Overall, the index has ended above the upper Bollinger Band. This combined with the steep uptrend suggests that the upward trend in the prices has a good chance of continuing.

However, we may see some temporary pullback inside the band in form of a range bound consolidation.

We reiterate all range bound oscillations that consolidation at higher levels offer should be utilised to make fresh purchases.

While guarding profits at higher levels as some consolidation is overdue, positive outlook is advised for the day.

STOCKS TO WATCH: Long positions were seen being added in stocks like ICICI Bank, Idea, Adani Power, PNB, SAIL, IDFC Bank, Bank of Baroda, Ashok Leyland, ONGC, Tech Mahindra and Bharti Airtel.

(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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