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Trade Setup: Nifty to extend fall if it doesn’t take out 10,950 soon

Wednesday will see the levels from 10,950 to 11,045 acting as immediate resistance area.

, ET CONTRIBUTORS|
Updated: Jan 22, 2019, 09.20 PM IST
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Drop---TS-1200
Wednesday will see the levels of 10,950 and 11,045 acting as immediate resistance area.
A breakout once again eluded stock market as the NSE benchmark Nifty failed to move past important 10,950 level. The index made a flat start to the trade and it immediately slipped into the negative territory after hitting the resistance zone.

Nifty remained in the falling trajectory for most part of the session, but the final hour saw some recovery with the index ending with a loss of 39.10 points or 0.36 per cent.

Although a stable start to the trade is expected on Wednesday, it is important to note that despite several attempts, Nifty has not yet achieved a breakout from the ascending triangle formation.

More the index remains under the current formation, higher are chances of it getting near to the apex. It is now extremely important for the market to move past the 10,950 mark soon to avoid losing significance of this otherwise bullish formation.

Wednesday will continue to see the levels of 10,950 and 11,045 acting as immediate resistance area. Supports may come in at 10,860 and 10,810 levels.

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The Relative Strength Index (RSI) on the daily chart stood at 56.8112 and it remained neutral, showing no any divergence against the price. The daily MACD was bullish, as it traded above its signal line.

A long lower shadow emerged on the candles, but it does not hold any significance given the present structure of the charts.

The pattern analysis showed that Nifty remained in the ascending triangle formation. However, it is seen moving towards its apex as the expected breakout has been delayed. A clean and clear breakout shall occur only after the index moves past the 10,950 level.

Despite remaining in an otherwise bullish formation an ascending triangle, Nifty will remain vulnerable if it keeps delaying the much-expected breakout.

If the index moves much near to its apex, there are theoretical possibilities of this formation losing its significance.

We recommend staying away from shorts and also keeping positions on modest levels unless a clear breakout occurs. While adopting a selective approach to the trade, cautiously positive outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at 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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