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Outlook For Friday: NIFTY Moves Higher With Weaker Breadth; Chase Momentum While Strictly Trailing The Stops

In a yet another buoyant session, the NIFTY had a trending day on the weekly options expiry as it went on the end the day with gains. The markets saw a positive start to the day. It traded positive throughout the session as the Index remained in an upward rising trajectory. After a sharp up move in the first half of the session, the markets spent some major portion of the second half in a sideways trajectory. However, the last hour of the trade saw the markets improving as it managed to end near its high point. The benchmark index NIFTY ended with a net gain of 82.85 points (0.74%).

The weekly expiry of the options evidently dominated the trend. The highest Call OI which had its concentration at 11200 shifted higher, which enabled the NIFTY to settle above the 11200 mark. While trading modestly overbought, the markets are not showing any signs of giving up despite range-bound sessions on the intraday basis. Since the markets trade near the higher end of the upward rising channel, it needs to be followed cautiously though. The India VIX declined modestly by 0.98% to 24.6400.

Friday may see an uneventful start to the day. The levels of 11250 and 11295 will act as resistance levels. The supports come in at 11145 and 11030 levels.

The Relative Strength Index (RSI) on the daily chart is 72.91; it has marked a fresh 14-period high which is bullish. The RSI is neutral as it does not show any divergence against the price, and it trades in the overbought territory. The daily MACD is bullish as it trades above its signal line. A white body emerged on the Candles signifying that the markets closed higher than it opened. No other formations were noticed.

While trading above all its key moving averages, the NIFTY trades towards the higher end of the upward rising channel in which it is currently placed. 

The present technical structure shows that although there are no evident signs that indicate weakness, the markets are bit overstretched at this juncture. This would mean that the NIFTY may continue to inch higher and make incremental highs, but all such up moves may remain capped and vulnerable to selloffs at higher levels. On the other hand, any corrective, will make the trading range wider than usual. 

We recommend approaching the markets with caution while avoiding excessive long exposures at current levels. While continuing to guard profits at current levels and higher, a continuation of 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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