Trade setup: Nifty50 trapped in Rising Wedge; every rise making it vulnerable

It was yet another day of precarious trade, as the Indian equity indices inched higher to end on a positive note. Nifty saw a strong start to the session but spent the first half of the session without any directional bias. However, the second part of the day went on a positive note. Nifty pulled back from the lows and ended the day with a net gain of 98.60 points, or 1.06 per cent.

The analysis for Wednesday remains the same: Nifty continues to remain trapped in the Rising Wedge formation. The directional weakness of the market is likely to persist despite modest up-moves. We have the penultimate day of expiry of the current derivative series, and the session is going to be dominated by rollover-centric activities. The index also remains vulnerable at higher levels, and any profit booking should not come as a surprise.

Nifty is likely to face resistance at 9,410 and 9,465 levels, while supports will come in at 9,260 and 9,185 levels. The trading range is expected to remain wider than usual in the event of any corrective moves from higher levels.

The Relative Strength Index (RSI) on the daily chart stood at 52.49; it remains neutral and does not show any divergence against the price. The daily MACD is bullish, and it trades above the signal line. A Hanging Man pattern emerged on the candles. This can be a potentially bearish signal, as the candle has occurred during an up-move. It may likely halt the current rally. However, a confirmation is required on the next trading bar.

ET CONTRIBUTORS

Pattern analysis showed Nifty continues to remain precariously trapped in the Rising Wedge formation. Unless the index moves past the 9,600-9,650 zone, the current technical structure will keep the market vulnerable to profit taking at higher levels and might have bearish implications going ahead. So from a technical perspective, it is evident that any move on the upside is making the market incrementally vulnerable to bearish implications as long as it stays in the Rising Wedge formation. Given the current technical setup, we recommend adopting a highly selective approach and protecting profits at higher levels. Any bearish move going ahead cannot be ruled out as long as the markets stay in the current area pattern. 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)