Trade Setup: Major hurdle for Nifty50 remains at 15,850-15,900

Much on anticipated lines, the Nifty50 index failed to sustain its gains and came off from its high point before ending the day with a minor loss. The market had a strong start to the day. The opening stayed better than what the Asian trade setup and the SGX futures had suggested. The index got stronger as the day progressed and tested crucial resistance at 15,900. It spent some time there, trading in a capped range, but eventually was not able to move past that level. Selling pressure gripped the market as the Nifty50 index came off over 100 points from the day’s high. It erased all its gains and slipped into negative territory. The headline index finally ended with a net loss of 16.10 points (0.10 per cent).

Tuesday’s session once again reinforced the credibility of the resistance zone of 15,850-15,900 area. As of now, this remains the major hurdle for the market to cross. Options data also suggest heavy call open interest accumulation near the 16,000 mark, making it the strongest resistance point even if Nifty50 is able to take out 15,900. The market breadth remained evidently weak as 31 out of 50 stocks declined. Had the HDFC Bank stock not advanced, the index was in for a deeper trouble in Tuesday’s trade.

Volatility remained nearly at the same levels. The India VIX index rose 1.71 per cent to 12.2700. Nifty50 continues to face resistance at 15,850 and 15,900 levels. Support comes in at 15,730 and 15,680 levels.

The Relative Strength Index (RSI) on the daily chart is at 60.21. It stays neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line.

A Doji occurred on the candles. It also has a long upper shadow, which makes it predominantly bearish. If the current candle is examined with reference to pattern analysis, it has reinforced the credibility of the 15,850-15,900 zone as a stiff resistance area for the market.

All and all, the market is now getting entirely stock-specific. The performance of economy-facing high beta stocks is likely to remain weak. However, we may again see some pickup in defensive stocks. However, on a broader note, the market will remain more stock-specific rather than sector-specific until the weekly options expiry.

While keeping the analysis on similar lines like yesterday, we suggest continuing to approach the market on a highly selective note while protecting profits at higher levels.

(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)