Trade Setup: Nifty may oscillate in a wide trading range till it crosses 17,000

After a positive start, the index ended up marking its high point of the day in early minutes of the trade. As the market maintained the bulk of their gains in the first half, it ended up slowly paring all of those gains. Nifty drifted slowly and by late afternoon trade, it slipped into the negative zone. The modest losses continued to exist until the end; the headline index closed with a modest loss of 43.70 points or 0.26 per cent.

Nifty is likely to have a tepid start to the day on Monday. The index has broken above 16,400; this level is likely to act as a major pattern support in the event of any corrective move on the downside. The market may have broken out from the broad 15,700-16,400 trading range, but it seems that it has created yet another zone between 16,400-17,000 levels. The market is presently inside this relatively less broad range; any slip below 16,400 will push the market again into the broader trading range. The price action of Nifty against this level will be crucial to watch over the coming days.

While a soft start to the day cannot be ruled out, the index is likely to see resistance at 16,650 and 16,760 levels, while support may come in at 16,500 and 16,380.

The Relative Strength Index (RSI) on the daily chart is 52.25; it continued to stay neutral while not showing any divergence against price. The daily MACD stayed bullish and above the Signal Line. Apart from the black body that emerged, no other formations were seen on the charts. Overall, tentative and mildly tepid behavior cannot be ruled out; there has been some offloading of longs from higher levels as indicated by the derivatives data.

Nifty current month futures have shed over 6.43 lakh shares or 6% in net OI. The reduction in OI has come with the decline in Nifty; this indicates a likely unwinding of longs at higher levels.

The market is likely to stay ranged in the very near term; any sustainable up move shall occur only if the index can move past the 50-DMA, and/or 17,000 levels comprehensively. Until this happens, we will find the market staying and oscillating in a wide trading range. A highly selective and stock-specific approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])