Nifty: Trade Setup: Stay stock-specific in this market

The 15,900-15,950 zone remained a tough hurdle to clear for Nifty, as the 50-pack saw some corrective move before ending the day with a modest loss. The market saw a positive start to the day. Nifty opened with modest gains and traded in a limited and defined range for the first half of the session. However, the second half saw a wave of profit taking and Nifty came off over 180 points from the high point of the day.

A modest recovery was seen in the end, but the headline index ended with a net loss of 78 points (-0.49 per cent). Though the negative ending that the market had was modest on a closing basis, but the coming off of Nifty by over 180-odd points from the high point reinforces the importance of the 15,900-15,950 zone on the upper side. On the lower side, the market has again gone very near to its 50-DMA, which stands at 15,652 level at present.

This level will now act as an important support if the market continues to consolidate and correct within the defined range. The market is in for some technical pullback, but the 15,800 and 15,850 levels may pose resistance, as a lot of Call writing took place at these strikes. Supports come in at 15,700 and 15,610 levels.

The Relative Strength Index (RSI) on the daily chart stood at 50.19; it has marked a new 14-period low, which is a bearish signal. It also shows a bearish divergence against the price. The daily MACD is bearish and stands below the signal line. A large black body occurred on the candles. Its emergence near the high point reinforces the credibility of the 15,900-15,950 zone as a major resistance area.

The Nifty has been under sideways consolidation for over a month now; unless the 50-DMA is violated on a closing basis, it will continue to remain in the current sideways consolidation move. Longer the time the Nifty stays in this sideways move, more the conviction any move on either side will have.
Volatility had also increased; INDIA VIX spiked 6.29 per cent to 13.2325. As Nifty is above all the key moving averages, it is recommended not to get aggressive in creating shorts. Also, on the long side, it is strongly suggested to continue to stay light on overall exposures. The bottom line is that unless Nifty takes any directional bias below the 50-DMA or above the 15,900-15,950 zone, it would be prudent to continue staying stock-specific and selective while approaching the markets.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)