Trade Setup: Stay highly stock specific till Nifty closes above 14,374​​

In the previous technical note, it was mentioned that although Nifty managed to crawl back above its 100-DMA, the up move was more due to short covering and keeping its head above this point will be important for the benchmark index.

Friday’s session remained a consolidating and corrective one for the market as the index oscillated within a defined range before ending the day with a modest loss. Nifty had a weak opening but was soon off its morning lows and eventually moved inside the positive territory. However, the market gave up its recovery and slipped again in the afternoon session. The headline index finally ended with a net loss of 64.80 points or 0.45 per cent.

We are now stepping into the expiry week of the current monthly derivative series. The market is likely to start on a tepid note; the behavior of Nifty vis-à-vis its 100-DMA at 14,374 on a closing basis will be crucial to watch. It would be important for the index to move past and close above this point; more the index stays below this point, the higher will be the chances of it getting incrementally weak.

Volatility decreased a bit as India VIX came off by 1.45 per cent to 22.6900. Monday’s session is likely to see the levels of 14,390 and 14,450 acting as resistance points, while support will come in at 14,250 and 14,210 levels.

The Relative Strength Index (RSI) on the daily chart stood neutral at 42.83 and did not show any divergence against price. The MACD was bearish and below its Signal Line. A Spinning Top candle occurred on the charts. Such formations result out of indecisive behavior and lack of directional consensus among market participants.

The pattern analysis shows that the index continues to be inside the falling channel created after hitting the lifetime high at 15,431. The recent price action saw the index forming a congestion zone between its 50-and 100-DMA which were at 14,825 and 14,374, respectively. Nifty has now slipped below its 100-DMA point.

Overall, the texture of the market from a technical perspective is a bit precarious. Unless Nifty crawls back above its 100-DMA and closes above it, staying highly stock specific will go a long way. It is recommended to stay light on exposure and continue protecting profits vigilantly at every level.

(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)