Gemstone Equity Research & Advisory Services

Thursday Trade Setup: Options Expiry To Influence the Trend For NIFTY; Broader Bias Remains Negative Unless These Levels Are Breached

In our previous note, we had not only mentioned about the possibility of the markets seeing a pullback, but also the possibilities of a selloff at higher levels. While trading precisely on the expected lines, the NIFTY saw a strong start to the session. It got even stronger as the day progressed while moving past the 10800 levels. However, the second half of the session saw a sharp selloff from higher levels. The headline index gave up over 250-points from the high point of the day and even slipped briefly in the negative zone. While failing completely to capitalize on the strong start, the NIFTY ended the day with a marginal gain of 10.85 points (+0.10%).

The coming session will stay influenced by the weekly expiry of the options. The 10800 levels continued to see the highest concentration of the Call OI throughout the day. If the NIFTY stays weak, this may shift lower while shifting the resistance point lower as well. The INDIAVIX declined marginally by 1.30% to 29.2900. The zone of 10800-10880 have become an intermediate top for the markets unless taken out convincingly.

A soft start is likely on Thursday with the levels of 10650 and 10710 acting as resistance points. The supports come in at 10535 and 10480.

The Relative Strength Index (RSI) on the daily chart is 59.47; it has again made a fresh 14-period low which is bearish. RSI, however, also remains neutral and does not show any divergence against the price. The daily MACD is bearish; it trades below its signal line. 

A black body occurred on the candles. Apart from this, no other formations were noticed. Wednesday’s session has almost formed a parallel bar on the daily charts with little difference between the high point and the low point.

The NIFTY has not only resisted to the 200-DMA which presently stands at 10876, but it came off heavily after having failed to penetrate that level. This has reinforced the 200-DMA as a major resistance for the near term on the closing basis. This, coupled with a pattern resistance point at 10800, has made a zone of 10800-10880 a strong resistance zone for the markets.

Analysis for Thursday stays much on the similar lines. Intermittent pullbacks in the market cannot be ruled out. However, the index is very much vulnerable at higher levels and may see selling pressures if at all if sees any up move. We recommend staying away from making any large purchases and adopt a highly stock-specific view  on the markets.

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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