Geopolitical tensions in the West Asian region are easing, and given no fresh negative news, we can expect a quiet but stable start to the trade on Monday.
Nifty has again showed lack of strength at higher levels. This makes the 12,300-12,350 zone extremely crucial. The stock market may not see sustainable rally until this zone is taken out. The present technical setup makes the headline index vulnerable at higher levels.
Monday’s session is likely to see 12,295 and 12,340 levels act as resistance. Support may come in at 12,210 and 12,150.
The Relative Strength Index (RSI) on the daily chart was 57.41 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. A Spinning Top was formed on the charts. This candle has a small real body and indicates indecisive behaviour of the market participants.
As per pattern analysis, Nifty is in the broadening formation. During such formations, the highs are incrementally higher, which prevents a clean breakout. However, all three moving averages are now in the correct order, with 100-DMA crossing the 200-DMA from below a couple of days back.
All in all, there are possibilities of some incremental volatility resurfacing. Given the present technical setup, unless the 12,300-12,350 zone is taken out, the market will continue to remain vulnerable at higher levels, which in turn, can result in higher volatility.
We would recommend traders to stay light on positions and avoid excessive leverage. A cautious outlook is advised 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 [email protected])
