Finance Update

Trade Setup for Wednesday: Nifty50 may stage a reversal, faces resistance at 11,760 level

The daily RSI stood at the 74.51 level and it remained in overbought territory.

ET CONTRIBUTORS | Apr 02, 2019, 08.59 PM IST

For a third straight session on Tuesday, NSE Nifty lost momentum and faced profit taking at higher levels. Amid lower trading volumes, the index settled 0.38 per cent higher.

Nifty formed a Doji Star on Friday, followed by a long lower shadow (al most a shooting star) on the next session and finally a Doji star today.

Such potentially bearish formations on the technical charts, and that too on successive sessions are not often witnessed. These formations are clear indications of exhaustion in the present upmove.

We might continue to see market consolidating with a negative bias on Wednesday. Though Nifty ended just a notch below its record closing high, the momentum is very evidently lost and the high of 11,760 is expected to act as a strong resistance.

Wednesday’s session will see 11,760 and 11,795 levels act as stiff resistance. Supports remained much lower at 11,650 and 11,550.

The daily RSI stood at 74.5089 and it remained in overbought territory and showed bearish divergence. On the candles, a Doji Star has occurred. This formation is even more bearish, as it has followed similar reversal formations on two previous session. These collective formations have all the potential of marking a temporary top for the market.

All in all, despite liquidity chasing momentum, the market is clearly faltering. There are signs of profit taking at higher levels. If we look at the present structure of the charts, such potential reversal patterns on the candles followed by an overbought lead indicator — which persistently shows bearish divergence — is giving ample advance warnings of an impending imminent corrective moves.

Any upmove that now occur without even a minor correction will be extremely unhealthy for the market.

We strongly recommend traders to completely avoid buying at current levels, utilise upmoves to reduce positions and take profits off the table.

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

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

Source

Prakash Poojary
Business Analyst

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