Trade setup: Nifty evenly poised, must hold 12,126 for the next leg of rally

The domestic stock market snapped a two-day rally, as weekly options expiry dominated the session on Thursday. NSE Nifty opened in the red and traded in a sideways trajectory for most part of the session. After witnsessing a mild recocery towards the fag end, the index settled with a loss of 26.55 points or 0.22 per cent at 12,174.65.

The headline index is at a precarious juncture. If it fails to move past the 12,230 level, then it will create a lower top on the daily chart. However, in the same breath, the index has managed to keep head above the 50-DMA, which is at 12,126. Therefore, going ahead, any slip below 12,126 on a closing basis will bring in further weakness.

Friday’s session is likely to see a tentative start, with 12,200 and 12,250 levels acting as resistance, while support may come in at 12,130 and 12,050. In the event of a corrective move, the trading range is likely to get broader than usual.

The Relative Strength Index (RSI) on the daily chart was 53.62, and it stayed neutral, showing no divergence against the price. The daily MACD was bullish and traded above its signal line.

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Feb 13

As per pattern analysis of the daily chart, Nifty has remained in a broadening formation. While staying in this range, the index is likely to form a lower top if it does not move above 12,230. On the lower side, it is resting just above the 50-DMA.

The market has a tricky zone to navigate in order to move above the 12,230 level. Until this happens, it can mark a lower top at 12,230 and face weakness.

The headline index has closed above the 50-DMA level at 12,123. Holding on to this level will be important, as any breach below 50-DMA may invite some weakness. While continuing to stay stock specific, a cautious view is advised for the day.

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

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