July 14,2020 Trade Plan-Guard profit, stay stock specific

Nifty hits the 200-DMA wall.

While the market failed to capitalize on the strong opening, Nifty not only gave up all the gains but also slipped into the negative territory briefly. After a mild recovery from the low point, the headline index managed to end the day with a gain of 34.65 points, or 0.32 percent.

The market has continued to show multiple signs of fatigue at the current level. Volatility rose modestly as India VIX, which is at one of its lowest levels in recent times, rose 1.24 percent. It was for the sixth day that Nifty was not able to penetrate the 200-DMA, which currently stands at 10,885. The other signs that point towards diminishing momentum make the 10,885 level a major near-term resistance for Nifty50.

Tuesday’s session is likely to see a soft start. The 10,850 and 10,890 levels will act as overhead resistance points, while supports will come in much lower at 10,710 and 10,665 levels. Any corrective move is set to make the trading range much wider than usual.

The decline from the opening highs in the previous session has come with a decline in net open interest. This shows unwinding at higher levels. As long as Nifty rules below the 200-DMA on a closing basis, the market, in general, will stay vulnerable at higher levels. We reiterate our view of keeping fresh purchases highly stock-specific. Guarding profits vigilantly at higher levels will be a more prudent method of approaching the market now given the current technical setup.

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