Trade Setup: Nifty looking weak, but don't go for aggressive shorts yet

Nifty50, Nifty, Nifty Trade Setup, RSI, Trade Setup, India Vix

The domestic equity market wasn’t spared from the negative technical trade setup of global markets on Monday. Following a weak overnight trade setup, Asian markets traded weak in the morning. Because of this, the Indian market too had a gap-down opening. Nifty did recover over 250-odd points from the low point. But just when it seemed that the Indian market was once again putting up a resilient show, stocks came under a fresh wave of weakness.

Nifty again slipped over 200-odd points and ended near the low point of the day. The headline index closed with net loss of 188.25 points (-1.07 per cent).

Nifty has come off 400 points from its high point, may now see some stability and make some attempt to stabilise itself. Nifty’s price action against the 17,450 level will be extremely crucial. It will be very important for the index to crawl back above the 17,450 level to avoid any further weakness. If that does not happen, then the possibility of Niftu testing the 17,200-17,250 zone cannot be ruled out. We may see the market attempting to gain some stability. Nifty PCR across all expiries stood at 0.98, which is quite healthy. Volatility spiked; India VIX rose 14.84 per cent to 17.4925.

Tuesday’s session may see a jittery start. The 17,450 and 17,535 levels will act as potential resistance points, while support will come in at 17,350 and 17,280. The Relative Strength Index (RSI) on the daily chart stood at 67.93; it has slipped below the 70 mark from the overbought zone. The daily MACD has shown a negative crossover; it is now bearish and trades below the signal line. A candle with a long upper shadow occurred.

Nifty50, Nifty, Nifty Trade Setup, RSI, Trade Setup, India Vix

This reflects that the market was unable to sustain at higher levels. Pattern analysis showed a shart retracement after the market tested the high point. In the process, it has slipped slightly below its most immediate support and the basing point at 17,450. If Nifty does not crawl above this point again, it may continue to see modest weakness on the charts.

All in all, we recommend avoiding aggressive shorts at these levels because of more than one reasons. Nifty has just seen a retracement from its high point; and there is no sign of any structural damage on the chart or something that shows a change of trend.

Also, the decline has come with large addition in the current month future series. This indicates that there are large number of shorts are added in the system. We recommend avoiding aggressive exposure on either side and look for some stability

before initiating fresh purchases. While continuing to stay light on positions, a selective approach with a cautious outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of and and is based at Vadodara. He can be reached at

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