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Outlook For Friday: NIFTY Stays Below Key Levels; This Lead Indicator Need Our Attention

The expiry of the weekly options remained in stark contrast of the previous session as the markets had a secularly positive day. The markets opened positive, stayed stable, and got stronger through the day. The highest Call OI was concentrated at 11000 followed by 10800 strikes. A minor shift in these levels ensured that the NIFTY settles above the 10800 mark. The first half of the day remained range bound where the markets just maintained its opening gains; the second half stayed more trending in nature. The headline Index ended near the high point of the day with a net gain of 107.70 points (+1.01%).

The markets have again seen short covering from lower levels. This is reflected in the futures OI figures and as NIFTY has defended the previous day’s low, it has also not yet broken out above the key resistance of 200-DMA. The 200-DMA, which presently stands at 10884 needs to be closely watched and a chase of momentum should be done in a very careful way until the NIFTY closes above this level. The zone of 10840-10880 continues to stay a stiff resistance area for the markets. The volatility index, INDIAVIX, declined again by 4.55% to 24.9125.

Friday is likely to see a tentative start to the day. The levels of 10850 and 10885 will act as strong resistance points; supports will come in at 10730 and 10650 levels. The present technical setup indicates that any down moves is likely to make the trading range wider.

The Relative Strength Index (RSI) on the daily chart is 69.79; it stays neutral and does not show any divergence against the price. It is important to note that if the RSI declines, with or without the price action, it will then be moving towards a bearish failure swing. However, this has not happened yet, but RSI moves should be watched closely if we anticipate such a behavior from the indicator. The daily MACD is bullish and trades above its signal line. No significant formations were noticed on the candles.

All and all, it is also observed that the up moves in the markets are not coming with increased momentum. Though traders may continue to follow the trend, it should also be kept in mind that unless the NIFTY moves past the 200-DMA convincingly and closes above that level, the markets will continue to stay vulnerable at higher levels. Such a technical situation makes it important that we continue to vigilantly guard 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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