Trade setup: Nifty likely to stage a pullback; remain stock specific

The Indian stock market failed to capitalise on the opening gains, as NSE Nifty fell for a eighth straight session on Friday, down 22.90 points or 0.20 per cent.

Expect the index to make a quiet start to the week on Monday. Despite short-term structures remaining bearish, there are high chances the 50-stock pack may attempt to regain some stability and post counter-trend technical pullback.

However, pullback , if any, will have limited upside potential.

Monday’s session is likely to see 11,350 and 11,410 levels act as immediate resistance. Supports may come in at 11,220 and 11,180.

The Relative Strength Index (RSI) on the daily chart stood at 35.8688 and it has marked a fresh 14-period low, which is bearish.

The daily MACD stayed bearish and traded below its signal line. No important formations were observed on the candles.

The pattern analysis of the daily charts confirmed that the 11,760 level has reinforced itself as a major double top resistance. Further to this, following the corrective move Nifty witnessed, the index has slipped below the 50-DMA, and the upper trend line pattern support that existed just above the current levels.

As we approach general election outcome on May 23, the overall volatility will increase and it may become an integral part of the trading until the market fully digests the result.

A technical pullback is expected, and if that happens, traders can make fresh purchases. However, these buys should be kept highly selective in nature. All profits arising out of such selective longs should be vigilantly protected.

A pullback seems likely, but at the same time, it will remain limited, as the broader structure remains bearish.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)