Trade setup: Nifty not out of the woods, must confirm breakout

In yet another strong performance, Nifty retested its double top resistance as well as lifetime high of 11,760 on Tuesday and attempted a fresh breakout.

At the cost of sounding sceptic, we strongly feel it’s time to take a critical and realistic view of the situation.

India VIX has thrown the negative relationship with Nifty out of balance, the rupee has been depreciating in a volatile way and Brent crude is trading at 2019 highs. All these factors do not paint a pretty picture.

We may see a tepid start to the trade on Thursday, as the market will adjust to the global setup.

The 50-stock pack has attempted a breakout, but it is yet to confirm it. In any case, the market has become extremely risky for most traders and investors.

Thursday’s session is likely to see 11,810 and 11,865 levels act as immediate resistance points. Supports may come in at 11,760 and 11,550.


The Relative Strength Index (RSI) on the daily chart stood at 68.4392 and it showed a bearish divergence against the price. The daily MACD was bearish and it traded below its signal line.

The pattern analysis of the daily chart suggested that Nifty has made a strong attempt to break the double top resistance on the upside. However, with the complete breakout yet not achieved, 11,760 remained an important level to watch out for.

The broader technical parameters suggest that all upmoves are vulnerable to volatile swings. In case of any upmove, we advise traders to use them for protecting profits.

Still, there can be outperformance in some pockets and all fresh purchases should be kept focused on these sectors and on defensive stocks, which are rotating favorably at present.

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