Trade Setup: 15,200-15,250 strong resistance zone for Nifty; be stock-specific

Despite all the conducive environment and setup, the domestic equity market failed to capitalize on the positive opening that it got on Friday and ended the day on a negative note.

Headline index Nifty got a gap-up opening but formed its intraday high in early minutes of the trade. After spending the morning trade within a defined range, the index gradually gave up all its gain and slipped into the negative zone. Selling pressure intensified in the afternoon and Nifty slipped further deep into the negative. At one point in time, Nifty came off over 350 points from its highest level. Following some recovery from the lows, the index ended with a net loss of 143.85 points or 0.95 per cent.

From a technical perspective, Nifty has kept the short-term falling trend line drawn from its highest point still valid. This means that unless it moves past 15,200-15,250 zone again, it will stay vulnerable to profit taking bouts. In the previous session, as indicated by F&O data, Nifty March futures added over 2.91 lakh shares, or 2.60 per cent, in Open Interest, indicating creation and addition of fresh shorts to the system. NIFTY PCR across all expiries stood at 1.02, which continued to place the market at an even footing. This may cause some positive opening on Monday as some mild technical pullback cannot be ruled out in the initial trade.

Monday’s session may have a modestly positive start to the day with 15,065 and 15,130 acting as immediate resistance points for Nifty, while support will come in at 14,980 and 14,910 levels.

The Relative Strength Index (RSI) on the daily chart stood neutral at 53.46 and did not show any divergence against price. The indicator remained in a neutral symmetrical triangle formation; any resolution to this pattern will give advance cues of the directional bias the index may take over the coming days. The daily MACD remained bearish and traded below its Signal Line. An engulfing bearish pattern was seen on the candles; given its occurrence near the high point, it reinforces the zone of 15,200-15,250 as a strong resistance zone at higher levels for the index.

The market remains trapped in a broad consolidation zone; it will be a while before it takes a clear and sustained directional bias on either side. We will see any dips getting bought into even if it is only on the basis of short covering. In the same breadth, all bounces will face profit taking bouts unless Nifty decisively moves past the 15,200-15,250 zone. We reiterate that the need of the hour is to continue staying stock-specific and protect profits with moves on the either side. A cautious approach is advised for the day.

(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)