Market Outlook for Tuesday: Trade setup: Nifty50 may stay in a range; upside looks capped

The domestic stock market traded in a small range on Monday, as NSE Nifty did not show any intent to rally. The volatility — indicated by India VIX — which is hovering around its multi-month lows, inched up a bit.

After opening on a better-than-expected note, Nifty gradually gave up its gains to trade in the negative zone.

After recovering a bit during fag-end session, the headline index ended flat with a nominal gain of 10.05 points or 0.08 per cent at 12,255.85.

The market is likely to remain tepid due to year-end period, which will be reflected in lower-than-usual volumes. Though VIX rose 4.58 per cent to the 11 level, it continues to trade near multi-month lows.

The F&O data suggests that stiff resistance can be expected at around the 12,300 level. Technically, 12,300 is very crucial, and price action of Nifty against this level will be important to watch over the coming sessions.

The 12,300 and 12,335 levels will act as strong resistance on the last session of 2019. Support may come in lower at 12,010 and 11,930.

The Relative Strength Index (RSI) stood at 62.10 on the daily chart and stayed neutral, showing no divergence against the price. The daily MACD was bullish and traded above its signal line. However, the slope of the histogram indicated that the trajectory of MACD was declining.

A ‘Hanging Man’ pattern was formed on the candles. Though such a pattern requires confirmation on the next trading day, it has the potential to disrupt the current upmove.

As per pattern analysis, Nifty has attempted to resume its upmove again after breaking above 12,103 and then taking support near to this level after it suffered a throwback.

In the current setup, 12,100 and 12,300 levels will be crucial in terms of immediate support and resistance, respectively.

In Tuesday’s session, while Nifty may attempt to test the 12,300 level, there are minimal possibilities of the market staging a runaway rally beyond that point.

Even if we see some initial upmoves, it will be prudent to keep strict trailing stops and protect profits at higher levels. A cautious view 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)