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Friday Trade Setup: NIFTY Shows Fatigue At Current Levels; This May Act As A Disruption Of Trend

On the day of weekly options expiry, the markets played out much on the expected lines. In the previous technical note, we had mentioned that the markets may continue to inch higher, but at the same time, may also face some selling pressure at higher levels. The session saw the NIFTY opening with a modest gap up. However, the markets got stronger as the day progressed, and it also tested the 11900 levels. However, the last hour and the half of the session saw some profit taking from higher levels. The Index came off over 120-points from the high point, recovered a bit and finally ended the day with a net gain of 95.75 points (+0.82%).

Despite the relentless up move, the markets have now shown a clear sign of a fatigue and has showed some high possibilities of it taking a breather in the near term. The NIFTY has now shifted its support zones higher at 11400 and 11450; with this zone now acting as strong support in the near term, we expect the markets to stay in a broad range with now limited upsides. The levels of 11850-11900 now makes up a strong resistance zone making the upper end of the newly formed broad consolidation zone. 

Friday is likely to see the levels of 11860 and 11910 acting as resistance points. The supports come in at 11750 and 11710 levels. 

The Relative Strength Index (RSI) on the daily chart is 66.20; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.

A rising window emerged on the candles which results essentially because of a gap on the upside. However, along with this formation, it has also formed a Doji which would take precedence in the present technical setup. Since the Doji has occurred following steep uptrend, this signals a potential reversal or at least a disruption of the present trend.

Given the present technical setup, it would be prudent now to avoid any aggressive purchases. Any new purchases, if any, should be kept strictly limited to defensives. There many not be any major downsides in the markets, but some consolidation and profit taking moves from these levels cannot be ruled out. We recommend to approach markets with great amount of caution. Excessive leveraged exposure should be avoided, and profits should be guarded vigilantly. 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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