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The headline index has traded on the anticipated lines, as it pulled back from the extremely oversold levels on the higher time frame charts. This technical pullback is likely to get extended. However, the behaviour of Nifty against the 9,050 level will be key over the coming sessions.
The coming week will be a truncated one with Tuesday being a trading holiday for Baba Saheb Ambedkar Jayanti.
Monday’s session is likely to see a stable start with a modest positive opening. The 9,165 and 9,240 levels will act as immediate resistance, while support may come in at 9,050 and 8,910.
The Relative Strength Index (RSI) on the daily chart was at 47.65 and marked a fresh 14-period high, which is bullish. The indicator remained neutral and did now show any divergence against the price.
The daily MACD was bullish and it traded above its signal line. No significant formations were observed on the candles.
As per pattern analysis of the daily chart, Nifty is trying hard to form a base in the 7,800-8,000 zone for the near term. After making a low near 7,600, the index made a higher low near 8,000. If the 50-stock pack manages to stay above 9,050, it will put a temporary bottom in place for the near term.
We would recommend traders to exercise caution at higher levels on Monday. Profit must be protected with each upmove as some precautionary correction at higher levels cannot be ruled out as Tuesday is again a trading holiday. While staying selective, a cautious and stock-specific approach 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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