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Trade setup: Nifty50 must cross 11,980-12,000 zone to stabilise

Tuesday’s session may see a tepid start with 12,000 and 12,035 acting as resistance points.

, ET CONTRIBUTORS|
Dec 09, 2019, 08.07 PM IST
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Avoid buying on dips as long as the market trades below its overhead resistance levels.
The domestic stock market was back to winning ways on Monday. After opening on a flat note, NSE Nifty spent most of the session rangebound in the positive zone. The index oscillated in a small 40-point range and finally ended with a gain of 16 points or 0.13 per cent at 11,937.50.

The 12,000 level is likely to pose strong resistance on Tuesday, as this strike price holds the maximum Call open interest. Apart from that, the current technical structure suggests that the index has failed to take out the double top resistance, and is finding resistance at higher levels.

As the 50-stock pack has slipped and stayed below the short-term 20-DMA level, this zone is also likely to act as stiff resistance over the coming sessions.

Tuesday’s session is likely to see a tepid start with 12,000 and 12,035 levels acting as resistance points. Supports may come in at 11,900 and 11,820. Any momentum on the downside is likely to keep trading range broader than usual.

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The Relative Strength Index (RSI) on the daily chart stood at 51.51 and stayed neutral, showing no divergence against the price.

The daily MACD stayed bearish and remained below its trading range. A Doji appeared on the candles, which reflects the lack of conviction at higher levels. The Percentage Price Oscillator (PPO) stayed negative.

As per pattern analysis, the 100-DMA has slipped below the long-term 200-DMA, which reflects loss of momentum. Also, Nifty has closed below the short-term 20-DMA, which is at 11,980.

The 11,980 level, which is the short-term 20-DMA and 12,000, which holds the highest Call open interest, will continue to act as a strong resistance. As long as Nifty trades below these levels, it will continue to stay vulnerable at higher levels.

The volatility has remained near its lower range, and can be expected to rise over the coming sessions.

We would again advise traders to refrain from excessive exposure as any downside will increase the chance of Nifty testing the 11,800 level, which is the lower range of the current consolidation zone.

Also, avoid buying on dips as long as the market trades below its overhead resistance levels.

(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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