Trade Setup: Nifty may find resistance at 16,480-16,500 levels in the immediate near term

The move was robust and across the board. As Nifty kept marking fresh incremental highs throughout the day, the headline index closed on a very strong note posting a strong gain of 417 points (+2.63%).

It finally saw a strong rebound from the ‘double bottoms’ pattern support. The index has also held and validated the support area of 15,700-15,750 levels on the charts.

This zone stays as a strong near-term support for the markets as of now. These levels will have to be protected if the markets have to extend its pullback and avoid any incremental weakness from creeping in again.

The pullback was across the board as all the 50 stocks of Nifty50 ended with gains. The broader market breadth also remained very strong on the anticipated lines.

Wednesday is likely to see the levels of 16,330 and 16,485 acting as immediate resistance points. The supports come in at 16,160 and 16,030 levels. The trading range is likely to stay wider than usual.

ET CONTRIBUTORS

The Relative Strength Index (RSI) is at 40.86. It has crossed above 30 from an oversold situation which is bullish. It remains neutral and does not show any divergence against the price. The daily MACD is still bearish and below the signal line.

A large white candle appeared on the chart. This points at a strong move on the upside and also shows directional consensus of the market participants that dominated the trend for the day.

All in all, from a technical perspective, Nifty has held and validated the support zone of 15,700-15,750 levels. This zone is expected to lend strong support to the markets in the near term. Apart from this, if the technical pullback continues, the zone between 16,480-16,620 will need to be watched as this is a gap that was created a couple of days back.

In other words, if the technical pullback continues, Nifty may find resistance at 16,480-16,500 levels in the immediate near term. It is strongly recommended that rather than chasing any particular sector or a theme, one must continue staying highly stock-specific while approaching the markets.

It would be rewarding to focus on the stocks which show a confirmation of some bottom in place and are showing improving relative strength against the broader markets. A cautiously positive approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])