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Friday Trade Setup: NIFTY Likely To Stay Tentative; Protect Profits On Either Side Due To These Reasons

The markets had a volatile expiry day as the headline index NIFTY50 oscillated in the 150-points range during the day to end flat with a marginal loss. The Markets saw a negative opening to the session ahead of the expiry, but soon crawled in the green to trade with gains. The recovery was soon given up as the NIFTY witnessed an equivalent decline to test the opening lows. However, the second half of the trade saw some recovery again with the last hour staying extremely range bound. The Index finally ended with a negligible loss of 16.40 points (-0.16%).
 
 

The expiry dominated the trend. The NIFTY had maximum Call OI concentration at 10500, and apart from this, the 10400 and 10500 strikes saw high amount of call writing during the day. This ensured that the NIFTY stays below 10300 at close. With expiry out of the way, if we take a broader look at the technical, the 10500 has become an immediate top for the markets in the immediate short-term. Any sustainable up move shall occur only after NIFTY moves past this level convincingly. Until that happens, a ranged movement cannot be ruled out.

 
Friday is likely to see a tentative start the day. The levels of 10335 and 10360 will act as immediate resistance points. The supports will come in at 10210 and 10150 levels.
 
The Relative Strength Index (RSI) on the daily chart is 61.92. It stays neutral over a 14- day period, but if subjected to pattern analysis, shows a bearish divergence against the price. The daily MACD is bullish and stays above its signal line. Apart from a white body that appeared, no other significant formations were observed on the candles.
 
The pattern analysis shows that the NIFTY remains in the upward rising channel. However, it has shown initial signs of weakness as it has retraced without testing the upper trend line of the channel. It has done so while creating a large engulfing bearish candle; this makes this action more important amid current technical setup.
 
All in all, there are possibilities of intermittent up moves, but that being said, the NIFTY has continued to display some signs of weakness at higher levels. On Friday and thereafter, we will see NIFTY continuing to face resistance at higher levels. We recommend continuing to remain light on positions and keep protecting profits on either side of the move. The rationale behind such approach is that when the markets display signs of weakness, but the risk-on setup is in play, it tends to make the markets much more wide-ranged and volatile. A cautious view is advised for the day.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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