//Trade setup: Tread carefully till base formation gets confirmed

Trade setup: Tread carefully till base formation gets confirmed

In an extremely volatile session, the stock market struggled to find a short-term base, as it recovered from the day’s low to end on a flat note. After a stable opening and spending the first half of the trade in a capped range, the market came under a bear grip and lost ground rapidly.

After accumulating at the lower levels, the NSE benchmark Nifty made a sharp recovery from the lower levels to settled the day with a loss of 9.35 points or 0.09 per cent.

With stiff in the 10,900-10,950 zone, Nifty has attempted to create a potential short-term base for itself in Tuesday’s trade.

On Wednesday, expect a stable start to the trade, as the market may inch higher and move closer to its overhead resistance area.

Wednesday is likely to see the range of 10,720 and 10,750 levels acting as immediate resistance. Supports exist in the 10,600-10,560 area.

The Relative Strength Index (RSI) on the daily chart stood at 40.1262 and it has marked a fresh 14-period low, which is bearish. The daily MACD stayed bearish, while it traded below its signal line. A Doji has emerged on the candles. This pattern often points towards a potential short-term reversal in trend if they occur near the supports or when the security is oversold.

1
Wednesday may see the range from 10,720 to 10,750 levels acting as immediate resistance.

This seems to be the case with Nifty, though a confirmation will be required on the next trading day.

Broadly speaking, we will see the market remaining extremely volatile, more so when we have the impending expiry of the current derivative series and interim Budget immediately on the following day.

We enter the penultimate day of the expiry of the current series and therefore, expect the market to remain dominated with

Rollovers.

We will continue to see stock-specific activities and certain pockets are likely to see relative outperformance to the general market.

We strongly suggest continuing maintaining a stock-specific approach despite expected up moves, unless important overhead resistances are taken out.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)