Trade Setup: 15,431 an intermediate top for Nifty; volatility may spike

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Trade Setup: 15,431 an intermediate top for Nifty; volatility may spike


The domestic equity market extended its modest correction on Thursday as it ended yet another day on a negative note.

Headline index Nifty failed to see a stronger chart despite a firm Asian trade setup. It opened positive but marked the intraday high point in the first few minutes of the trade. Nifty slowly pared all its opening gain in the morning and slipped into the negative territory. It went to extend its loss as the index marked its intraday low point in afternoon trade. Following a mild pullback, Nifty ended the day with a net loss of 89.95 points or 0.59 per cent.

ET CONTRIBUTORS

The weekly options expiry continued to affect the trend for the day. The market is now in a broad consolidation zone as expected. In the process, Nifty has made the high point, i.e., 15,431, an intermediate top. We will not see any substantial up move unless Nifty moves past this point in a convincing manner. As long as this level is not taken out, we will see the market staying vulnerable to corrective moves and staying within a broad consolidation range.

Friday’s session is likely to have a quiet start. The levels of 15,150 and 15,225 will act as immediate resistance points, while support will come in at 15,000 and 14,950 levels.

The Relative Strength Index (RSI) on the daily chart was neutral at 63.25; it did not show any divergence against price. The daily MACD was bullish and traded above its Signal Line. However, the narrowing slope of the histogram suggested that a negative crossover of this indicator is likely over the coming days. Apart from a black body that

occurred on the charts, no other formation was noticed.

Pattern analysis shows that Nifty has not only resisted to its short-term rising trend line resistance, but it has also resisted to the extended trend line resistance. This trend line is drawn from the lows formed in the month of March 2020.

Overall, the index has made the level of 15,431 an intermediate top. The market breadth continues to remain a concern and this needs to be watched over the coming days. There are all chances of Nifty staying within a defined range over the coming days. However, volatility may tend to show some increase in the near term. We reiterate continuing to stay cautious and avoid chasing high beta stocks. US Dollar Index staying firm with US 10-year yields spiking remains another set of concern for the emerging markets in the near term.

(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)





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