Trade Setup: Nifty may make a technical pullback on Monday; stay away from high beta stocks

As India’s Covid graph continued to rise, the domestic equity market also had a severe sentimental hit on the last trading day of the week on Friday.

Headline index Nifty opened on a negative note, but tried to recover in the first hour of the morning session. However, that recovery did not last long as the market found itself gripped under a fresh selling pressure once again. The index stayed range-bound for some time and in the second half, weakness intensified. Nifty started to drift lower and went on to end the day with a deep cut of 263.80 points or 1.77 per cent.

Nifty slipped below its 50-DMA at 14,782 once again. With the market ending at its low point in the previous session, we may find some initial weakness in the trade on Monday. The zone of 14,450-14,500 held itself as an important support zone. While 14,459 was the 100-DMA from where the index bounced off a few times, and 14,500 held maximum Call OI; however, this may see a shift if weakness persists. Nifty PCR across all expiries stood at 1.07, which made the market evenly placed.

Monday’s session is likely to have a tepid start to the day. The levels of 14,680 and 14,735 will act as immediate resistance points, while support will come in at 14,550 and 14,480 levels.

The Relative Strength Index (RSI) on the daily chart stood neutral at 49.63 and did not show any divergence against price. The daily MACD was still bullish, and remained above its Signal Line. A black body occurred on the charts; apart from which no other important formations were noticed.

The pattern analysis shows that the index was very much within the falling channel formed after marking the high point at 15,431. Nifty is once again between its 50-, and 100-DMA at 14,782 and 14,459, respectively.

There are chances that after a weak expected start, there may be some technical pullback in the market. However, the technical structure and the sentiment, both remain weak. Even if there is a pullback, we reiterate staying away from high beta stocks while preferring defensive stocks. Adopt a cautious and stock-specific approach for the day.

(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)