Gemstone Equity Research & Advisory Services

Outlook For Friday: NIFTY Has This Zone To Navigate; Guard Profits Vigilantly

In a perfectly orchestrated session, which represents any weekly options expiry day, the markets witnessed a sharp short covering again from the lower levels. The markets saw a better-than-expected start to the day but traded in a very narrow range in a sideways trajectory. The NIFTY took no directional bias for most of the day. However, it was the last hour of the trade which showed expiry-led moves in the markets. The headline index moved past the 10700 mark, and despite coming off slightly from the high point, it ended with net gains of 121.75 points (+1.15%).

The levels of 10800 saw the highest Call OI concentration throughout the day. The highest PUT OI shifted to 10700 levels which ensured that the Index settles between these two levels. The NIFTY has again resisted to a rising trend line pattern resistance that lies just below the 200-DMA. This has made sure that the stiffest of the resistance zones of 10800-10880 continues to exist for the markets.

The opening levels and trajectory on Friday will be crucial to see if the NIFTY attempts to move towards the 200-DMA, which presently stands at 10872. For Friday, the levels of 10780 and 10835 will act as resistance points. The supports will come in at 10650 and 10570 levels. 

The Relative Strength Index (RSI) on the daily chart is 63.05; it stands neutral and does not show any divergence against the price over the 14-day period. The bearish failure swing that occurred remains very much in play and the lead indicator shows a negative divergence against the price of the immediate short term. The daily MACD is bearish; it trades above its signal line.

The pattern analysis shows that the NIFTY trades within the broad rising channel. However, the index is seen resisting to a rising trend line that is formed within the channel and stays below the 200-DMA.

All in all, the analysis remains on the similar lines. This means that there may be a few intermittent bounces in the markets. However, for a sustainable portion of rally to occur, the markets will have to move past and close above the 200-DMA convincingly. The zone of 10800-10880 will continue to offer strong resistance to the up moves, if any. We recommend chasing the up moves in a highly stock-specific manner and keep guarding profits at higher levels.

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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