Trade setup: Nifty vulnerable at higher levels; 12,000 stiff hurdle
The 11,930 & 11,995 levels will act as resistance. Supports may come in at 11,850 & 11,800.
The 12,000-12,050 range continues to be a critical resistance zone for the market, which Nifty needs to move past convincingly for a sustainable upmove.
Dalal Street is showing signs of exhaustion, and rallies need to be approached with caution unless 12,000-12,050 zone is taken out.
Monday’s session is likely to see a soft start to the trade. The 11,930 and 11,995 levels will act as strong resistance points, while supports may come in at 11,850 and 11,800.
The Relative Strength Index (RSI) on the daily chart stood at 62.15 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded above its signal line.
A candle with a long upper shadow was formed on the charts. This candle cannot be called a Shooting Star as it has happened during a moderate consolidation and not near the high point while stalling the upmove.
Still, the emergence of this candle near the upper levels has the potential to stall the trend. This would need confirmation on the following session.
The pattern analysis of the daily chart confirms the 12,000-12,050 zone as an immediate top. Nifty has repeatedly stalled its upmove near this zone.
All in all, the headline is unlikely to see any runaway rally in the short term as long as it trades below 12,000-12,050 on a closing basis. Unless this zone is taken out, all upmoves will remain vulnerable to profit taking bouts at higher levels.
While an overall rangebound session is expected for Monday, in the event of any corrective moves, the range is likely to get wider than usual. We advise traders to vigilantly protect profits at higher levels.
(Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)