Stock Market Analysis – Trade Setup – Market is likely to see a steady and positive start to the trading day

In the previous technical note, it was mentioned that in the absence of adverse signals from the global markets, there is a high probability that the markets will go up little by little. According to this analysis, Nifty saw a strong opening on Friday; it opened higher, got stronger and ended the day on a strong note. Markets traded in a sideways range after a strong start as they protected their opening gains.

The second half of the session saw the index rack up gains as it continued to make incremental highs throughout the day. Gains were talked about throughout the session and at no time did the markets show any tendency to correct. The main index NIFTY50 ended the day with a net gain of 182.30 points (+1.13%).

The market is likely to see a stable and positive start to the trading day; Nifty has finished near the upper edge of the wide trading range of 15700-16400. The opening of the market and its price action against the 16400 level will be crucial. If the index is able to hold its head above 16400 for long, it may see an extension to the upside as markets will attempt to fill the gap between the 16500-16650 levels. If this happens, then we can safely assume that the most recent low near 15700 is the low set by the markets for the near future.

On Monday the 16400 and 16565 levels are likely to act as potential resistance points. Brackets come in 16280 and 16210.

The Relative Strength Index (RSI) on the daily chart is 47.95; it remains neutral and does not show any divergence against the price. The daily MACD is bullish and remains below the signal line. An ascending window emerged above the sails; it is bullish as it results from a gap and usually resolves in the direction of the trend.

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All in all, markets are better positioned to extend their upside move; however, based on pattern analysis, this will be possible if NIFTY can break above the 16400 levels and hold above it. If this happens, we will also see a risk-on approach in the markets and we will see some high beta stocks start to do better going forward as well.

It is recommended to avoid trying to short the markets, even if they are below the 16400 levels. Even when the markets are within the wide trading range, dips will still be bought. It is further suggested that rather than trying to short markets, all consolidation and minor moves lower should be used to make purchases of good quality stocks. Pockets like Realty, Financial Stocks, FMCG, PSE etc. resist in the markets.


(Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based in Vadodara).

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