Trade Setup: Trade Setup: All fresh purchases must be highly stock-specific and defensive in nature

It was once again a negative day for the Indian equity markets, but this was the first time that the markets made some clear attempts to find a potential base for themselves in the near term.

After a weak overnight trade setup, Nifty opened on a weaker note – a much weaker note than expected. The markets suffered another intraday opening, but they spent the bulk of the session recovering from early lows. At one point, Nifty had recovered most of its losses, however, the headline index closed with a net loss of 109.40 points (-0.67%) in the last few hours of recovery.

ETMarkets.com

There is a possibility that the market may try to gain some ground in an attempt to create a temporary base for itself. The most immediate low, i.e. the previous low of 16,142, is expected to act as a reference point for the most immediate support for the markets.

The 16,000-16,150 area will be the most important support area to see if we look at things from the most immediate and short-term technical point of view. Markets continue to pile on shorts for the fourth day in a row – Nifty current month futures have added over 1.41 lakh shares or 1.30% in net open interest.

Volatility increased slightly – India VIX rose 3.68% to 22.0325. The 16,435 and 16,550 levels are likely to be seen as potential resistance points on Tuesday. Support comes at the 16180 and 16110 levels. The trading range is expected to be wider than normal.

The Relative Strength Index (RSI) on the daily chart is 33.73. It has continued to mark a new 14-day low which is bearish. However, the RSI is neutral and shows no divergence against the price. The daily MACD is bearish and remains below the signal line.

a spinning top embossed on the candle; Its occurrence near a potential support area could act as a temporary reversal point for the markets. However, this will require confirmation on the next business day.

Overall, it is clear that the markets are scrambling to find a potential base for themselves; Including new shorts over the past four seasons, a strong technical snag cannot be ruled out at any point in time. It is recommended to avoid creating new shorts in such markets as short traps can occur at any time.

Nifty is eyeing an imminent and overdue technical pullback; All new buys should be placed highly stock-specific and defensive in nature, avoiding shorts. A cautiously positive approach to the day is advised.

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of Equity Research.Asia and Chartwizard.ae and is based in Vadodara. Ask them at milan.vaishnav@equityresearch.asia. can be contacted at

Originally published at Pen 18