nifty: Trade setup: If Nifty is not able to move past 17,350, it will stay prone to profit-taking

It opened above the 50-DMA levels, but continued to resist the 17,300 levels and the 100-DMA which presently stands at 17,326.

Although the market continued to trade on a positive note, it still remained in the broad consolidation range and did not show any tangible breakout from the zone. While continuing to maintain its strength until the end of the session, the headline index ended the day with a net gain of 103.30 points (+0.60 %).

If the market inherits a stable global trade setup on Wednesday, it may see some extension of the move. However, for any sustainable up move to start, Nifty will have to open and keep its head above the 100-DMA level which stands at 17,326. Unless taken out comprehensively, this level will continue to act as a resistance for the index on a closing basis.

Going by the weekly options expiry data, even when a heavy put writing was seen at 17,300, the maximum call OI still stands tall at 17,500. This means that even if the buoyancy stays intact, the levels of 17500 still remain a formidable resistance for the markets in the immediate near term.

Volatility eased as India VIX came off by 5.78% to 21.3025. Wednesday is expected to see the levels of 17,365 and 17,450 acting as probable resistance points; the supports come in at 17,240 and 17,130 levels.

The daily RSI is 56.93. It continues to stay neutral and does not show any divergence against the price.

The daily MACD is bullish and stays above the signal line. The pattern analysis shows that while Nifty has taken visible support multiple times at 200-DMA, it was resisting the 50-, and the 100-DMA which stood at 17,326.

With highest call OI at 17,500, the zone of 17,350-17,500 has become a stiff resistance area for the markets for the immediate near term. On the lower end, 17,000 remains a strong area.

Presently, despite a buoyant close, Nifty still remains in this broad consolidation/trading range of 17,000-17,500 levels. Unless Nifty moves past 17,500 or slips below 17,000, it will continue to oscillate back and forth without any sustainable directional move.

The opening of Nifty on Wednesday and its price behavior against the levels of 100-DMA will be crucial. If it is not able to move past the 17,350 level and stay above that, it will continue staying prone to profit-taking bouts from higher levels.

Even if there is an extension of the move on the higher side, it is strongly suggested to use that move in booking profits and taking some money off the table. It would not be wise to chase the up move until the level of 17,500 is taken out convincingly.

(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])