Trade setup: Any Nifty pullback to remain limited; stay cautious
The RSI stood at 42.57 level on the daily chart and stayed neutral, showing no divergence.
We have weekly options expiry on Thursday, and it is broadly expected that Nifty will continue to hold the crucial support zone of 10,780-10,800. If there are no overnight adverse developments, a quiet start to trade is expected with some mild technical recovery likely from current levels.
The 10,800 Put saw high volumes and has the maximum Put open interest builtup and this level is expected to act as a support.
While keeping a very close eye on the crucial support, the 10,885 and 10,910 levels are expected to act as resistance. Supports may come in at 10,780 and 10,710.
The relative strength index (RSI) stood at 42.57 on the daily chart and stayed neutral, showing no divergence against the price. The daily MACD remained in the buy mode, but was seen sharply narrowing its trajectory. No notable formations were seen on the candles.
As per pattern analysis, a sharp decline was triggered near the neckline area of the rounding top formation that Nifty breached. This has shifted the resistance zone lower and has reinforced its credibility as the resistance zone.
With a stable start expected for Thursday, we still reiterate a very cautious view of the market. Nifty is due for a technical rebound, but in the same breath, it is very much likely the index finds it difficult to sustain at higher levels.
We recommend traders to maintain a highly cautious and stock-specific view on the market.
(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)