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Trade setup: Nifty needs to top 20-DMA for the next leg of rally

A fall below the 11,900 level on Thursday will infuse fresh weakness into the market.

, ET CONTRIBUTORS|
Dec 11, 2019, 09.19 PM IST
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The RSI on the daily chart stood at 49.90 and stayed neutral, showing no divergence against the price.
The domestic stock market saw a mild technical pullback on Wednesday, as it recovered from lower levels to end in the positive zone. NSE Nifty despite opening in the green, pared all its gains and slipped below the 11,850 level during the session. The index rebounded sharply in the last hour to end with a gain of 53.35 points or 0.45 per cent at 11,910.15.

Thursday’s session will see the expiry of weekly options. The 12,000 strike continues to hold maximum Call open interest (OI), which in a way, is likely to act as the upper range for the headline index. The 11,900 strike also saw some shifting of OI. The maximum Put OI stayed at 11,900 followed by 11,800. The 11,900 level also holds the second-highest Call OI.

The behavior of Nifty against 11,900 will be crucial, as a slip below this will infuse weakness into the market.

We expect a quiet start to the trade on Thursday with 11,955 and 12,000 levels acting as resistance points. Supports are at 11,880 and 11,810.

The Relative Strength Index (RSI) on the daily chart stood at 49.90 and stayed neutral, showing no divergence against the price.


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The MACD continued to remain bearish and traded below its signal line, while the Percentage Price Oscillator (PPO) was negative. Apart from a white body that emerged on the candles, no other important formations were formed.

As per pattern analysis, the 100-DMA level has slipped below the 200-DMA, signalling loss of momentum in the near-term. The 12,103 level is still a double top resistance for the market. At present, Nifty is below its short-term 20-DMA, which is at 11,981.

The pullback in the last one of the trade on Wednesday came on the back of short covering from lower levels.

The headline index won’t be not out of the woods, unless it closes above the 20-DMA and 12,000. Moreover, it is unlikely to show any runaway rise and make attempts to move towards its double top resistance again.

We would recommend traders to chase momentum very cautiously unless Nifty takes out its overhead resistance levels. Profits should be protected at each incremental level. A highly cautious view 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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