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Trade Setup: Nifty to consolidate a bit; trading range may be wider



Trade Setup: Nifty to consolidate a bit; trading range may be wider

The domestic equity market was at its resilient best as it staged a remarkable recovery in Tuesday’s session to close on a strong note. Nifty saw a jittery start to the day, spent the initial minutes of trade in a ranged manner and then slipped into the green within the first hour of the day. It seemed that Nifty was finding it difficult to breach the important 17,450 level.

However, the second half of the day saw a remarkable recovery in the index. Nifty rebounded over 225 points from the low point and also managed to close above the important 17,450 level. The headline index finally ended with a decent gain of 165 points (+0.95 per cent).

From a technical perspective, Nifty’s crawling back above 17,450 level was a positive development. This level was the most immediate base point, which Nifty had violated. From the most near-term perspective, the 17,400-17,450 range should continue to act as an important support zone for Nifty. There was a spate of short covering from the lower levels; this was evident as the upsurge has resulted in the reduction of net open interest.

Moreover, strike price 17,400 has seen heavy Put writing and Open Interest addition. This shows that this point may offer support to Nifty during the current phase of consolidation.

The volatility, that had spiked in the previous session came off. India VIX slipped by 5.56 per cent to 16.5200. On Wednesday, Nifty is likely to see 17,600 and 17,635 levels act as immediate resistance points. Supports should come in at 17,510 and 17,400 levels. The trading range may remain wider than usual in the coming days.

The Relative Strength Index (RSI) on the daily chart stood at 72.36; it remains slightly overbought. It is neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line. A white body emerged; apart from this, no other formation is observed.

All and all, the market is likely to continue to consolidate for some more time in a broad range. As long as Nifty is able to defend its most recent base point, it is likely to stat in this broad range between 17,400 and 17,490.

As long as Nifty is within this , the market should continue to stay highly stock specific. We recommend staying away from high beta stocks. Purchases should be kept focused on select banking and realty stocks along with other names that are defensive in nature and are showing improved relative strength against the broader market. A cautiously positive approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of and and is based at Vadodara. He can be reached at [email protected])

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