Trade setup: Nifty needs to stay above 10,180-10,250 levels to stabilise
Indian stock market underperformed its Asian peers on Monday, as the NSE benchmark Nifty ended with a modest loss.
The index reversed its course after a 100-point gap-up opening, witnessed heavy selling pressure in the last hour of the session and settled 58.30 points or 0.57 per cent lower.
The session on Tuesday is again likely to see a stable opening, as Nifty may look to regain some stability.
If we examine Mondays trade, the intraday high was 10,408. This means that Nifty resisted its major pattern resistance area, which we had mentioned in our previous notes.
Having said that, in event of a continued weakness, it would be critical for Nifty to maintain its important pattern support zone of 10,180-10,250 levels.
If the market sees some stability on Tuesday, the levels of 10,310 and 10,345 will act as resistance levels on the upside. Important supports are expected to come in at 10,180 and 10,140.
The RSI on the daily chart stood at 33.0636 and it remained neutral, showing no divergence against the price. The daily MACD stayed bearish while trading below its signal line.
A large bearish engulfing candle was seen on the daily Charts. Since it has emerged during a continued downtrend, it may not be significant enough to have any major bearish implications.
However, as it has emerged during a downtrend, it may be a last engulfing candle, which indicates a potential reversal and a bounce back. However, this requires confirmation on the next trading day.
Of late, there has been some relative underperformance observed in the Indian market vis-à-vis its Asian peers. The global trade has been stable so far, and if we do not have any negative news flows overnight to deal with, we again might see Nifty attempting to stabilise.
From the intraday high on Thursday, Nifty has lost over 450 points and it will be no surprise if it attempts to gain some stability.
The behavior of the Nifty against the levels of 10,180-10,250 will be critically important to watch out for. A cautious view on the market is advised for the day.
STOCKS TO WATCH: Long positions were seen being added in stocks of GMR Infra, Adani Power, ICICI Bank, Bharti Airtel, Bank of Baroda, TV18 Broadcast, BHEL, Ashok Leyland, Vedanta, NBCC, HDFC And Aurobindo Pharma.
(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)