Trade setup: Nifty needs to top 12,103 for the next leg of rally

The domestic stock market began the week on expected lines as NSE Nifty consolidated in a defined range on Monday. The market made a better-than-expected start, but soon pared all its initial gains and oscillated in a small 30-point range. The index finally ended with a loss of 7.85 points or 0.07 per cent at 12,048.20.

Tuesday’s session is likely to see more consolidation as the index trades below its double top resistance at 12,103. Despite incremental highs, the index has not taken out this zone.

In the same breath, the short-term 20-DMA, which stands at 11,972 would be an important support to watch. Even though the market has continued to display a strong undercurrent, breaking above the double top resistance at 12,103 would be necessary for a sustainable rally.

Tuesday’s session is likely to see 12,105 and 12,170 levels act as resistance, while supports may come in at 12,000 and 11,960.


The RSI on the daily chart was at 60.65 and stood neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. A black body emerged, and the size of the bar created a parallel bar on the chart.

As per pattern analysis, Nifty has pulled itself back inside the upper Bollinger band after closing above it a couple of sessions back. In the process, it has continued to resist the Double Top formation with the resistance point at 12,103.

If Nifty continues to consolidate, the short term 20-DMA would be crucial to watch. For a sustainable breakout, the index needs to move past the double top resistance of 12,103 comprehensively and close above that level. Until that happens, the rangebound consolidation may continue.

Dalal Street has continued to display a resilient mood, and given such a technical setup, we would strongly recommend traders to avoid creating aggressive shorts.

While making selective purchases with any dips that the market offers, a cautiously positive approach is advised for the day.

(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)