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Trade setup: Nifty50 likely to fall further if it stays below 50-DMA

The 12,150 and 12,185 levels will act as resistance. Support is at 12,080 and 12,000.

, ET CONTRIBUTORS|
Last Updated: Jan 27, 2020, 09.04 PM IST
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The domestic stock market was back to its losing ways on Monday, as NSE Nifty snapped a two-day winning run. The index opened lower and traded in a range for most part of the session. The selling intensified in the last hour, as the 50-stock pack ended with a loss of 129.25 points or 1.06 per cent at 12,119.

The index has given up most of its gains of the previous two days. Monday’s session saw the index once again closing at its 50-DMA, which stands at 12,123.75. The price action against the 50-DMA is crucial to watch out for in the coming days. Any breach of this level on a closing basis will see the index drifting lower. On the other hand, midcap stocks are likely to continue their outperformance.

Tuesday’s session will again see a jittery start, and the opening and the trajectory that the market forms will dictate the trend for the day. The 12,150 and 12,185 levels will act as resistance, while support will come in at 12,080 and 12,000. Just like in the previous session, any fall will make trading range wider than usual.
ETMarkets.com
Jan 27

The Relative Strength Index (RSI) on the daily chart stood at 46.45 and continued to remain neutral, showing no divergence against the price. The daily MACD stayed bearish and traded below its signal line.

As per pattern analysis of the daily charts, Nifty has remained in the broadening formation and has marked 12,400 as a potential top. The index has again ended at its 50-DMA, making this zone a vital point to watch out for in the coming sessions.

All in all, the frontline market is expected to remain under pressure in the short term. Dalal Street is likely to stay highly stock-specific, with only midcaps putting up a good show.

We would advise traders to avoid using declines to make purchases. Stay away from aggressive purchases and maintain a highly cautious view on the market.

(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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