Stock Market

Trade setup: Nifty must take out 11,100-11,200 for next leg of rally

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In absence of positive triggers, the domestic stock market took a breather on Thursday as NSE Nifty snapped a five-day winning streak to end 52.90 points or 0.48 per cent lower at 10,982.80.

The index has been clinging on to its short-term 20-DMA at 10,960. The headline index exhibited signs of exhaustion at higher levels, and in the absence of positive triggers, may trade with a negative bias over the coming sessions.

The 50-DMA and 200-DMA levels are negatively converging at 11,200, and this may act as the confirmation of a sluggish medium-term trend. We expect a tepid start to trade on Friday and the 11,000 level will be critical to watch out for.

The 11,050 and 11,130 levels will continue to act as stiff resistance.

Supports may come in at 10,910 and 10,850. The relative strength index on the daily chart stood at 47.79 and stayed neutral, showing no divergence against the price. The daily MACD was bullish and traded above its signal line.

An engulfing bearish line formed on the charts.

This candle may be potentially bearish as it has emerged after an upmove.

However, this will need confirmation on the next bar. The pattern analysis showed that Nifty is showing signs of exhaustion after the recent pullback.

The 11,100-11,200 zone remained a stiff resistance zone for the index. Nifty futures have added over 9.46 lakh shares or 5.62 per cent in open interest.

The index is poised at such a critical juncture that it will continue to face pressure at higher levels unless the 11,100-11,200 zone is taken out convincingly. Until this happens, we will continue to see the market remaining highly vulnerable at higher levels. We advise traders to continue to approach the day on a cautious note, while avoiding excessive exposure on either side. (Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research - Advisory Services, Vadodara.

He can be reached at This email address is being protected from spambots.

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