Gemstone Equity Research & Advisory Services

Thursday Trade Setup: Weekly Options Data Make These Levels Important For NIFTY; Keep Guarding Profits

In a very programmed session, the NIFTY traded in a defined range before ending the day with a modest loss. The NIFTY saw a modestly negative opening and witnessed a move that remained confined in a very narrow range. For the most of the day, the Index saw itself moving in a 50-point range; it was the second half that saw some wider moves as at one point in time, NIFTY was down over 100 points. After some recovery towards the end, the headline Index still ended with a net loss of 29.65 points (-0.27%).

NIFTY stays precariously poised as the weekly options expiry will dominate the trajectory of the trade on Thursday. The 11200 level has seen constant accumulation of maximum CALL OI, which the highest PUT OI is at 11000 levels. Unless any tactical shift occurs, the Index may remain confined within this 200-point range. Apart from this, signs of fatigue stay evident as the decline has seen shedding of Open Interest of over 2.71 lakh shares or 2.55% in NIFTY futures. Thursday might see some more amount of volatility staying ingrained in the session. 

Thursday will see the levels of 11165 and 11250 acting as overhead resistance points. The supports come in at 11060 and 10980 levels.

The Relative Strength Index (RSI) on the daily chart is 71.20. It remains in the overbought zone; stays neutral as it does not show any divergence against the price. The daily MACD is bullish as it trades above its signal line. Apart from a black body that emerged on the candles, no other formations were noticed.

The pattern analysis shows NIFTY within the upward rising channel, more towards the higher end of the current trend. Presently, it comfortably trades above all its key moving averages.

With the Index having moved past the 200-DMA which is currently at 10863, it has certainly moved its support levels higher. However, that being said, if we look from the immediate short-term perspective, some amount of consolidation or a mild corrective move cannot be ruled out. So far as the next trading session is concerned, it will be weekly options expiry that will dominate the trend with the level of 11200 continuing to pose very stiff resistance on the upside. We recommend keeping the exposures moderate and expect some volatility to remain embedded in the session. A cautious approach 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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