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    Trade Setup: Nifty50 likely to test 50-DMA; better stay light for now

    Synopsis

    The levels of 11,410 and 11,455 are likely to act as resistance area for Nifty on Tuesday.

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    The levels of 11,410 and 11,455 are likely to act as resistance area for Nifty on Tuesday.
    Indian stock market had a worse-than-expected start to the week, as NSE benchmark Nifty opened lower and got weaker to end the day with heavy losses. Though the technical set up was weak on higher timeframe charts, the opening was impacted even more by the downgrade.

    Post a minor gap-down opening and after a deeper drift, the Nifty spent the day in a 40-point range ending the day with a cut of 137.45 points or 1.19 per cent.

    For Tuesday’s trade, we expect the sluggish behaviour of the market to persist. The Nifty has taken support at its upward rising trend line, but it is likely to breach this support on the downside. However, the opening would be crucial, and any drift will open the possibilities of the markets testing its 50-DMA again.

    Tuesday’s session will likely see resistance at 11,410 and 11,455 levels and supports may come in at 10,350 and 10,316. Any dip below these levels will induce some more weakness in the market.

    The Relative Strength Index (RSI) on the daily chart is 46.4937 and it remains neutral showing no divergence against the price. The daily MACD is bearish as it trades below its signal line. No significant formations are observed on the candles.
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    If we look at pattern analysis, the Nifty reverted to its mean after a sharp run-up.

    However, on the higher time-frame charts, it is still seen over extended and this may cause some technical weakness in the near term.

    The previous session witnessed clear unwinding of longs as the Nifty declined with a marginal decrease in the open interest. Also, the previous session saw virtually no attempts by the market to regain lost ground and this may result into some tepid opening and some weakness persisting in the market. However, there will be sectors which will continue to relatively outperform the markets. Highly cautious and stock
    specific approach is advised for the day.

    STOCKS TO WATCH: Long unwinding was observed in stocks like Axis Bank, Federal Bank, Ashok Leyland, Dabur, NMDC, BHEL, Granules, PFC, Vedanta, NTPC, Sriram Transport Finance, CAPF, Bajaj Finance, Petronet, Tata Steel and Mahindra & Mahindra.

    (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.)
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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