Trade setup: Nifty50 structurally weak, needs to top 10,800 level
The daily RSI stood at 31.78 and showed a bullish divergence against the price.
The volatility during the day was also due to weekly expiry-led adjustments. Thursday’s session has inflicted considerable incremental damage on the charts. The decline has brought Nifty’s resistance points much lower from the 200-DMA to around the 11,000 level, and this has resulted in shifting of the base. In the event of any technical bounce, these levels will act as stiff resistance points.
Nifty has mildly breached the minor double bottom support of 10,800. It would be key for the headline index to crawl above this level for a technical pullback. Friday’s session is likely to see a tentative start with 10,800 and 10,910 levels acting as resistance points. Supports may come in at 10,700 and 10,630.
The daily RSI stood at 31.78 and showed a bullish divergence against the price. Nifty formed a 14-period low while the RSI did not do so, resulting in a bullish divergence against the price. The daily MACD continued to stay bearish while trading above its signal line.
The pattern analysis showed that the market has resumed its downtrend after it breached the neckline of the rounding top and pulled back only to halt at the 200-DMA.
We suggest traders to stay away from fresh exposures as Nifty is very near to the oversold levels. However, it also remains structurally bearish.
The possibilities of a technical bounce cannot be ruled out, but all such moves are set to meet with profit taking bouts at higher levels. A very cautious view is advised for the day.
(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)