Finance Update

Trade setup for Thursday: Trade setup: Nifty forms ‘Double Top’, may continue correction

The domestic equity market showed classical signs of correction for a fourth straight session on Wednesday. The NSE

Nifty

fell over 120 points from the day’s high to end with a loss of 0.59 per cent .

The index formed a classical ‘Double Top’ on the daily chart, as it corrected from the 11,761 level after crossing its previous high of 11,760.

Nifty may see a flat to mildly negative start and this corrective phase is likely to continue in Thursday’s session as well.

During the day, the market will also react to the outcome of RBI monetary policy meet, where the central bank is widely expected to slash interest rates. A 25-bp cut has been priced in by the market.

Anything higher than that will be a positive surprise. However, 11,760 level will be extremely difficult to take out.

Thursday’s session will see 11,710 and 11,760 levels act as resistance points. The supports may come in much lower at 11,610 and 11,500.

The daily RSI stood at 68.7290 and it remained neutral against the price. However, it has just slipped below the 70 level from a topping formation, which is bearish. The daily MACD stayed bullish, but has narrowed its trajectory.

An Engulfing Bearish candle occurred on the charts. This is the fourth successive bearish candle. Since this formation occurred after an upmove, it is signalling a trend reversal.

Overall, the market is giving enough signals since the last four sessions, and with each day, it is showing signs of a potential top.

Moreover, India VIX moving higher along with the market signals discomfort and lack of consensus at higher levels.

We again advise traders to reduce positions with each upside. Buying on dips should be avoided, as the market is seen reversing its trend in the near term. A highly cautious view is advised for the Thursday’s session.

(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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