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Thursday, May 6, 2021

Trade Setup: Nifty may continue to consolidate within a defined range; keep leveraged exposures limited

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In a day of consolidation for Indian equities, headline index Nifty oscillated within a defined range on Friday before ending the day with a modest gain.

The index opened on a quiet note on anticipated lines. Following a flat opening, Nifty momentarily slipped into the negative zone, only to crawl back inside the positive territory. After that, the market did not take any directional cues; it oscillated within a defined range until the end of the session. It pared its gain in the last hour-and-a-half of the trade and ended with a net gain of 36.40 points or 0.25 per cent.

The technical setup on the charts, and therefore the analysis, remain pretty much on similar lines. Nifty has managed to keep its head above its 100-DMA at 14,316 and formed a congestion zone within a falling channel with the 50-DMA acting as a major likely resistance on a closing basis. This level stood at 14,862.

While remaining inside the falling channel, Nifty is likely to continue consolidating within a defined range. Unless the market is not out of this channel by taking any directional cue on the either side, all up moves will continue facing selling pressure at higher levels.

Volatility declined as India VIX came off by 2.33 per cent to 20.4025. Monday’s session is likely to have a quiet start to the day again with the levels of 14,680 and 14,735 acting as resistance points, while support will come in at 14,565 and 14,500 levels.

The Relative Strength Index (RSI) on the daily chart stood neutral at 47.81 and did not show any divergence against price. The daily MACD was bearish and remained below its Signal Line. A candle with a long lower shadow occurred on the charts. Such a candle emerges when prices settle much lower. This indicates discomfort of market participants at higher levels and denotes a potential weakness. However, any interpretation will require confirmation on the next bar on the charts.

While staying within the falling channel, Nifty has created a nearly 500-point congestion for itself between its 50-, and 100-DMA at 14,862 and 14,316, respectively. The present technical setup of the market is likely to keep it stock-specific in its texture. Also, defensive stocks are likely to do relatively better as compared to the broader market. We reiterate that leveraged exposures should be kept limited while profits should be vigilantly protected with moves on the 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.)

(What’s moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

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