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Trade setup: Nifty50 may stage a pullback; outlook is still bearish

Nifty may not see a significant upmove, & consolidate between 100-DMA & 50-DMA levels.

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Last Updated: Feb 18, 2020, 08.53 PM IST
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RSI on the daily chart stood at 45.48 and continued to remain neutral, showing no divergence against the price.
The domestic stock market fell for a fourth straight session on Tuesday despite staging a smart recovery in the later half of the day. NSE Nifty opened on a negative note and slipped below the crucial 100-DMA level at 11,942 in intraday trade. The index rebounded over 85 points from the day’s low to finally settle with a loss of 53.30 points or 0.44 per cent at 11,992.50.

The headline index now trades well below its lower top that it marked near the 12,250 level. It has also violated 50-DMA and short-term 20-DMA, which stand at 12,135 and 12,053, respectively. Nifty, however, bounced off from the pattern support of the broadening formation, and has held on the 100-DMA support, which is at 11,942.

Wednesday’s session is likely to see a stable start. The 12,050 and 12,065 levels will act as resistance, while support may come in at 11,950 and 11,905.

The Relative Strength Index (RSI) on the daily chart stood at 45.48 and continued to remain neutral, showing no divergence against the price. The daily MACD was bullish and traded above its signal line. However, the indicator is set to report a negative crossover, as the slope of the Histogram has sharply narrowed over the past couple of days.

Feb 18


A ‘Hammer’ candle was formed on the daily chart. The pattern is not a bullish ‘Hammer’, but just a candle with a long lower shadow, which may be less potent. However, it is important, as it has emerged near the strong pattern support area.

The market is expected to get some respite from the selloff. However, it may not see any significant upmove, and may consolidate between 100-DMA and 50-DMA levels.

In the event of an upmove, it would be prudent not to get carried away, and instead, such moves should be used to protect profits.

On the lower side, the 100-DMA level, which is at 11,942, will be a crucial support to watch out for in the coming session.

A cautious view is advised, as despite a likely technical pullback, the broader outlook remains negative.

(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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