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Trade setup: Nifty50 likely to hit 11,800; avoid buying on dips

The RSI on the daily chart stood at 46.28 and marked a fresh 14-period low, which is bearish.

ET CONTRIBUTORS|
Dec 10, 2019, 08.51 PM IST
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Traders should avoid aggressive buying at current levels unless the market shows some signs of a technical pullback.
After an indecisive session on Monday, the domestic stock market took some directional bias and continued its slide on Tuesday. The session remained secularly bearish as NSE Nifty spent the entire day in a falling trajectory, showing no signs of reversal. The index finally ended with a loss of 80.70 points or 0.68 per cent at 11,856.80.

The market is trading on a weaker note and some mild technical pullbacks cannot be ruled out on Wednesday. However, as technical setup also remains weak, any bounceback is likely to get sold into. There are higher chances of Nifty drifting towards the 11,800 level, which is the lower end of the broad consolidation zone. Resistances shifted lower in Tuesday’s session.

Wednesday’s session may see a tepid start. Although mild technical pullbacks may occur, 11,915 and 11,960 levels will act as immediate resistance points. Supports may come in at 11,810 and 11,750. Also, a fall will again make the trading range wider than usual.

The Relative Strength Index (RSI) on the daily chart stood at 46.28 and marked a fresh 14-period low, which is bearish. The daily MACD stayed bearish and traded below its signal line. The Percentage Price Oscillator (PPO) stayed negative.

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After a ‘Doji’, which reflects the indecisive behavior of the market participants, Nifty on Tuesday took a directional call and made a big black body on the charts.

Pattern analysis confirms that despite making incremental highs, the index has failed to break above the double top resistance at 12,103. The slipping of 100-DMA below the 200-DMA is also a sign of loss of short-term momentum.

There are high chances of the headline index testing the lower end of the consolidation range at 11,800. Also, the setup doesn’t support buying on dips strategy anymore.

We would recommend traders to avoid aggressive buying at current levels unless the market shows some signs of a technical pullback.

With the broader technical setup remaining weak, pullbacks are likely to stay shallow and short-lived unless Nifty moves past its crucial overhead resistance.

(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.)

Also Read

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Trade setup: Nifty vulnerable at higher levels; steer clear of technical pullback

Trade setup: Nifty may continue to consolidate; stay stock specific

Trade setup: Better stay light on positions; Nifty may consolidate

Trade setup: Nifty may consolidate at higher levels; downside looks limited

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