Trade Setup: Nifty looking strong, may head to 11,400-11,450 zone – Economic Times

Nifty finally took out the micro resistance level in the 11,225-11,235 zone on Tuesday. The market saw a positive start to the day. The index opened positive and traded with capped gains in the first half of the session. However, some real strength came in early afternoon on, and Nifty went on to move past the 11,300 level.

After trading near the high point of the day until the end of the session, the index settled the day with gains of 168.75 points, or 1.52 per cent.

In all probability, Nifty has resumed its move to test the upper trend line of the rising channel, where it has been moving for some time now. Though it may not do it right away, the index is likely to test the 11,400-11,450 zone soon if the current momentum continues.

In another show of resilience on the downside, while Nifty resumed its up-move after a sideways consolidation, volatility index INDIA VIX also came off 5.14 per cent to 23.7300 level, which is at one of its lowest levels of recent times. The momentum will remain in place unless Nifty slips below the 11,100 level.

Tuesday’s session may see some extension of the up-move, at least in the initial trade. The 11,335 and 11,410 levels will act as key resistance, while supports will come in at 11,245 and 11,175 levels.

The Relative Strength Index or RSI on the daily chart stood at 72.18. It remains neutral and does not show any divergence against the price. The daily MACD remains bullish as it trades above the signal line. A white body emerged on the candles, meaning the close of the session was higher than its opening level, which indicated a secular up-move during the session.

Pattern analysis showed Nifty is likely to move higher towards the 11,400-11,450 zone, as that is the upper edge of the rising channel that the Index is trading in. Nifty has resumed this move after facing resistance mid-way inside the channel in the 11,225-11,235 area. The Index currently trades above all its key moving averages.

All in all, the market is showing strength with each minor decline. Discomfort among the market participants was evident from the sideways consolidation and the way every minor decline got bought into.

Having said this, we recommend following the up-move with strict stop losses, and staying alert at higher levels.

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