Trade setup: Nifty to fall further if it breaks below 11,690 level
With a quiet start expected on Tuesday, 11,730 and 11,775 may act as resistance points.
From a technical perspective, Nifty has managed to hold above its support of 50-DMA on a closing basis. This level stands at 11,689, and the index’s behavior against this mark will be the key.
Though some mild upmoves can be seen on Tuesday, they may remain capped as any breach below the 11,690 level on a closing basis will result in more weakness.
With a quiet start expected on Tuesday, 11,730 and 11,775 levels will act as resistance points. Supports may come in at 11,675 and 11,610.
The Relative Strength Index (RSI) on the daily chart stood at 46.93 and it remained neutral, showing no divergence against the price. The daily MACD continued to stay bearish while trading below its signal line. The candles did not show any significant formations taking shape.
As per pattern analysis, it has been observed that Nifty has defended 50-DMA, which stands at 11,689. As long as the index trades above this mark, we will see the market consolidating with limited upsides.
All in all, there are possibilities of intermittent pullbacks. However, they will face resistance in the 11,800-11,840 zone. Nifty has a pattern resistance in this area in the form of a falling trend line, which begins at 12,100 and joins the subsequent lower tops.
On the other hand, the 11,690 level is vital to watch out for. As long as Nifty can protect this level, we will continue to see consolidation in a limited range. Any breach will invite more weakness.
We recommend traders to remain light on exposures and avoid aggressive positions on either side. With volatility expected to remain ingrained, a cautious view 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 email@example.com)