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Trade setup: Nifty likely to stay muted; protect profit at higher levels

Monday’s session is likely to see 12,295 and 12,340 levels act as resistance.

Last Updated: Jan 21, 2020, 10.05 PM IST
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The domestic stock market on Friday made a stable start to the session and scaled higher as the day progressed. Later, benchmark equity indices reversed gains in the second half of the day. Thanks to some recovery in the fag-end session, NSE Nifty finally ended with a gain of 40.90 points or 0.33 per cent at 12,256.80.

Geopolitical tensions in the West Asian region are easing, and given no fresh negative news, we can expect a quiet but stable start to the trade on Monday.

Nifty has again showed lack of strength at higher levels. This makes the 12,300-12,350 zone extremely crucial. The stock market may not see sustainable rally until this zone is taken out. The present technical setup makes the headline index vulnerable at higher levels.

Monday’s session is likely to see 12,295 and 12,340 levels act as resistance. Support may come in at 12,210 and 12,150.

The Relative Strength Index (RSI) on the daily chart was 57.41 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. A Spinning Top was formed on the charts. This candle has a small real body and indicates indecisive behaviour of the market participants.

As per pattern analysis, Nifty is in the broadening formation. During such formations, the highs are incrementally higher, which prevents a clean breakout. However, all three moving averages are now in the correct order, with 100-DMA crossing the 200-DMA from below a couple of days back.

All in all, there are possibilities of some incremental volatility resurfacing. Given the present technical setup, unless the 12,300-12,350 zone is taken out, the market will continue to remain vulnerable at higher levels, which in turn, can result in higher volatility.

We would recommend traders to stay light on positions and avoid excessive leverage. A cautious outlook is advised 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)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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