Trade Setup: Staying above 15K crucial for Nifty; be highly selective

After a negative opening, the index soon crawled back inside the positive zone. Nifty, however, did not stay long in the green and slipped back into the negative. The index traded with capped and limited losses until afternoon. However, the final hours of the trade saw the profit taking wave getting stronger as Nifty saw an intensified decline. After a recover of some 80-odd points from the low point, the headline index ended with a net loss of 137.20 or 0.91 per cent.

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Despite a structural setup that may cause the corrective mood to continue, Nifty is a bit oversold on very short-term parameters. Following any expected pullback, the upside potential stays capped and limited as of now, at least until this expiry, unless a tactical shift of momentum occurs. While Nifty may face stiff resistance between 15,200-15,350 as per options data, Nifty PCR stayed healthy at 1.19. In any case, moving past 15,000 mark and staying above it is crucial for Nifty not just for Monday, but for the rest of the week.

Monday’s session may have a modestly positive start to the day. The levels of 15,000 and 15,115 may act as resistance points, while support will come in at 14,900 and 14,860 levels.

The Relative Strength Index (RSI) stood at 58.02; it remained neutral and did not show any divergence against price. The daily MACD showed a negative crossover on the expected lines; it was below its Signal Line and bearish. A black candle emerged on the charts; apart from this, no other significant formation was seen.

The pattern analysis shows that the pattern resistance drawn in the form of a short-term trend line holds as Nifty has slipped below that point. Bollinger bands are wider than usual; this hints at the increased volatility and the probability of the market returning to its normal range.

All in all, the need of the hour is to the approach the market on a highly selective note. Among all high beta names, there are many stocks that are showing distinct bearish divergences from their lead indicators. On the other hand, there are certain pockets of stocks, regardless of the sectors they belong to, are showing a short base formation along with the bullish divergences on their lead indicators. All this translates into picking the right stock and in the process staying highly stock specific and selective.

(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)