Trade Setup: Tepid start likely on Monday; keep purchases selective on a cautiously positive outlook

The market continued to inch higher last week. At the same time, it halted the move near the key resistsance areas that fall near the lifetime high for Nifty.

Following a stable start as expected, the Nifty stayed above the crucial 17,800 levels. It was because of this that it was able to maintain gains and close well above this level. Despite staying in the positive for the entire day, the intraday directional bias was largely range-bound. The Nifty oscillated in a 70-point range throughout the day. The index had pared its gains in the afternoon trade at one point in time but it managed to recover those gains towards the end of the session. The headline index ended with net gains of 104.85 points (+0.59%).

The Nifty has closed very near its lifetime high of 17947. One strong move, and we will see the index marking fresh highs again. We are likely to see a tepid start on Monday; the F&O data continues to point at existence of inherent strength in the markets. Friday’s move has seen addition of fresh long positions. This is reflected in the Nifty October futures which added over 4.56 lakh shares or 3.72% in Net Open Interest. In case if any subdued start, Indian market may once again show resilient behaviour against its peers.


Monday is likely to see the levels of 17,950 and 18,090 acting as immediate resistance points. The supports come in at 17850 and 17790 levels. The Relative Strength Index (RSI) on the daily chart stands at 65.74; it remains neutral and does not show any deviation against the price. The daily MACD is bearish and remains above the signal line.

The pattern analysis shows that the Nifty has marked a small double top formation on the daily chart. Any thrust above 17,900 levels will help Nifty test its previous high point and inch higher. Until this happens, we may expect minor consolidation in an extremely range-bound manner.

All in all, the inherent strength in the markets remain intact. It was mentioned in the previous technical note that Nifty will get a fresh impetus and strength to move higher if it moves past 17,800 levels. While Nifty moved on expected lines, it has also shown the existence of internal strength in itself. Given the present technical setup, even if some minor consolidation occurs, it is recommended not to short the markets at current levels. While continuing to keep purchases selective, a cautiously positive outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. The views are his own.)