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Trade setup: Nifty rises, but fails to cross 20-DMA; stay cautious

The RSI stood at 53.78 and stayed neutral, showing no divergence against the price.

, ET CONTRIBUTORS|
Dec 12, 2019, 09.20 PM IST
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Friday’s session may again see a quiet start with resistance coming in at 12,000 and 12,065 levels.
In a session dominated by weekly expiry of options, NSE Nifty on Thursday spent the entire day in 11,940 to 12,000 range, while trading on a positive note.

These two points were very crucial as they had the maximum Call and Put open interest during the day. The index came off from its day’s high after testing the 12,000 level and finally settled with a gain of 61.65 points or 0.52 per cent at 11,971.80.

The headline index halted its pullback at the short-term 20-DMA, which is at 11,986. It would be critical for the index to close above this level to move higher. If this doesn’t happen, Nifty can form a Head and Shoulder formation over the coming days.

It is important to note that there is no such formation as of now, but it can get formed if Nifty shows retracement and does not move past the red-dashed like drawn on the charts.

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Friday’s session may again see a quiet start with resistance coming in at 12,000 and 12,065 levels. Supports are at at 11,910 and 11,870 levels.

The Relative Strength Index (RSI) stood at 53.78 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line, while the Percentage Price Oscillator (PPO) stayed negative.

A rising window was formed on the candles. Such a formation usually emerges due to a gap. In the present case, it may not be potent as Nifty has ended near its short-term resistance point of 20-DMA.

As per pattern analysis the index pulled back after getting oversold on the short-term indicators. However, the pullback halted just below the short-term resistance of 20-DMA. As long as Nifty continues to close below this level, no runaway upmove can occur.

All in all, despite displaying buoyant undercurrent, Nifty still has some critical overhead resistances to breach. Until this happens, we would recommend traders to chase upmove in an extremely cautious manner and protect profits at higher levels.

It would be important for the market to move past the short-term overhead resistance before it gives a sustainable pullback. We strongly recommend to adopt a cautious and stock-specific approach 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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