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Tuesday, June 22, 2021

Trade setup: Nifty likely to remain range-bound with limited upside

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Nifty traded precisely on the anticipated lines in Tuesday’s session. The absence of overnight global cues caused the market to open positive and that got stronger as the session progressed. At the same time, Nifty hit a hurdle precisely at the Double Top resistance point of 11,430.

After opening on a higher note, the headline index tested these levels as it marked the day’s high of 11,437. As expected, Nifty encountered a fresh wave of selling from this point, which saw it pare over 140 points from its high point. While ending near the low point of the day, Nifty50 settled with a net loss of 37.70 points, or 0.33 per cent.

Even though there are two more sessions left before the weekly options expiry, Nifty has practically ruled out the possibility of moving past the 11,500 mark, as a significant amount of Call writing happened at that level today. This level now holds second highest Call OI after 11,650.

Importantly, the significance of the 11,430 level has been reinforced as an important Double Top resistance, as the 50-pack faced strong resistance at that point. Looking at it from an immediate short-term perspective, Nifty will not have any sustainable upmove unless it manages to take out the 11,430 level.

A11ET CONTRIBUTORS

The possibility of a mild technical pullback cannot be ruled out. On Wednesday, the 11,365 and 11,430 levels are going to act as key resistance points for Nifty, while supports will come in at 11,250 and 11,185 levels. The Relative Strength Index, or RSI, on the daily chart stood at 50.03; it has marked a fresh 14-period low, which is a bearish indication. The daily MACD remains bearish and trades below the signal line.
A Small Engulfing Bearish candle has emerged on the charts. This remains important as it highlights the importance of the 11,430 level as a pattern resistance. Pattern analysis reveals Nifty has failed the Double Top breakout which it had achieved when the index moved past the 11,430 level. In the process, it has marked a lower top at 11,800. This level can act as an intermediate top for Nifty.

Going into Wednesday’s trade, the market is expected to remain largely range-bound with limited upsides. The 11,250 level will be crucial in the near term as any breach of this mark will invite incremental weakness. We recommend continuing to adopt a crucial view on the market and avoid aggressive positions on either side.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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