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Trade Setup for Wednesday: Trade setup: 10,198-10,250 zone to be key for Nifty50 on Wednesday

Equities witnessed yet another volatile session, as Nifty spent the major part of the day oscillating in a capped range. Though the last hour of the trade saw the index paring its gains sharply, as the ever-depreciating rupee and the rise in Brent crude took its toll. The Nifty ended losing 47 points or 0.45 per cent.

The market is now poised at a very critical juncture. The Nifty premium in the current derivative series is almost wiped off and it now just stays at 15 points. As we approach Wednesday’s trade, we will continue to see volatility remaining ingrained in the system. We see a quiet start to the trade, but we will also see the market oscillating in a defined range.

For Nifty, the level of 10,198 now remains extremely critical level to watch for in the coming days. To form and confirm a base, the sustenance above this level will be critical.

The Nifty is likely to see supports come in at 10,250 and 10,198 and resistance, in event of a pullback, will be see resistance at 10,345 and 10,370 levels.

The RSI on the daily chart is 22.4701 and it remains in highly oversold area. It also shows bullish divergence against the price. Daily MACD stays bearish while trading below its signal line.

Overall, the market is presently making great efforts in marking a potential base at current levels. Usually, when lead indicators get oversold, by the time they rise and give a buy signal, the prices usually tend to consolidate and oscillate in a capped range with some volatility. This seem to be happening in case of Nifty.

However, for this reading to hold true, it would be extremely crucial that the Nifty does not breach the level of 10,198. The zones of 10,198-10,250 are extremely critical support zones for the market if it must form a base at current levels.

However, this reading would be valid assuming that there will be no fresh macroeconomic factors that would create fresh negative triggers for the Markets. If US Dollar is to stall up-move and US 10-year yield not running away swiftly, we can expect the bottom to be formed in the current zone. We continue recommending light on exposures while maintaining a cautious view on the market.

STOCKS TO WATCH: Long positions were seen being built in stocks like Dr Reddy’s Laboratories, Adani Ports, Adani Enterprises, Wipro, Vedanta, Infosys, Ashok Leyland, IDFC, KPIT and Hindustan Zinc.

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




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