Nifty has started crawling towards the expected termination point around 11,458 but maintains its sequence of high bottoms on the daily scale. It formed a ‘Spinning Top’ formation which is another sign of exhaustion of the ongoing momentum. Also, we have been witnessing a developing negative divergence on the weekly scale RSI which is quoting at 71.30 now; way lower below its swing dated 25 JAN 2018 established at 75.60 when the index closed at then record high of 11,069.95. Since the confirmation of the termination is yet to be established its prudent to maintain a trail stop strategy and exit longs in case 11260 is breached on the closing basis. Also on the higher side long positions could be reduced once near the expected target zone of 11,458 as we expect a climax of the ongoing up move to be witnessed soon.
The sector has now moved into the Long-Long unwinding cycle and seems to have formed a commendable base. Positive sector outlook for the current expiry and the occurrence of a ‘Bullish Harami’ on the weekly scale. The recent upmove and a close above its short-term averages along with the daily RSI above 50 augurs well for an extended up move towards its 200 DEMA placed around 882. Trading longs could be maintained with a stop below 830 for an immediate move towards 880.
Occurrence of ‘Bearish Belt Hold’ formation on the daily scale, reaffirms the resistance zone near 930. A close below 896 could confirm the bearish implications of the pattern & could push it lower towards 850 gain. Conditional shorts could be considered below 896 with a stop above 908 for a target upto 850
Disclaimer: The analyst may have positions in any or all the stocks mentioned above
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