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Thursday Trade Setup: NIFTY To Stay Ranged Amid Expiry Controlled Moves; Momentum Appears To Be Diminishing

Ahead of the weekly options expiry and Federal Reserve’s interest rate decision, the Indian equity markets witnessed a controlled session where it ended with gains led by short covering in the last hour of the trade. The markets saw a positive opening and remained in positive for most of the day. The NIFTY traded sideways in a limited and defined range and oscillated in a 100-point range during the trading session. Just while as it traded on a flat note, the short covering in the last hour of the session saw a sharp surge in the markets. This finally led the headline Index to end the day with gains of 69.50 points (+0.69%).
 

With weekly expiry coming up, the markets are likely to see an orchestrated and controlled session once again. The NIFTY has maximum amount of PUT OI concentration at 10000 strike. Unless there is any tactical shift, the Index may not slip below this level. The markets will also react to the Federal Reserve’s Interest rate decision which is expected later in the night of June 10. The volatility cooled off a bit as the INDIAVIX retraced by 2.54% to 29.4375.

 
Thursday is likely to see the levels of 10185 and 10230 as overhead resistance point. The supports come in at 10050 and 10000.
 
The Relative Strength Index (RSI) on the daily chart 65.46; it remains neutral and does not show any divergence against the price. The daily MACD is bullish as it trades above the signal line. However, the slope of the histogram is falling, and it suggests diminishing momentum of the current move. No other important formations were noticed on the candles.
 
The pattern analysis shows the NIFTY in the upward rising channel that was formed once the rising wedged was resolved on the upside.
 
Overall, despite minor up moves, the level of 100-DMA, which presently stands at 10254 will pose resistance to the Index on the closing basis over the immediate short term. Because of the falling nature of the 100 DMA, the resistance zone has got bit wider between 10250-10350 levels. Unless the NIFTY manages to move past this zone on a closing basis, it will continue to find stiff resistance near these levels. We reiterate avoiding aggressive positions given the present technical setup and continue to approach the markets with a high degree of caution as the session may stay ranged given the expiry of the weekly options.

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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