Gemstone Equity Research & Advisory Services

Thursday Trade Setup: Apart From RBI Policy, NIFTY Has These Two Crucial Points To Take Care Of

In the previous technical note, we had mentioned possibilities of the markets extending its gains, but in the same breath, had also cautioned about the discomfort of markets at higher levels. While trading on the expected lines, the NIFTY opened positive and surged higher during the early morning trade. However, between 11200-11250 zone, the markets came under corrective pressure. The index came off over 100-points while completely wiping out its gains. The second half of the session saw more of a range bound trade. After slipping in the negative territory briefly for a couple of times, the headline Index ended flat with minor gain of 6.40 points (0.06%).

With weekly options expiry coming up, Thursday’s trade will stay dominated with such moves. The markets are just in between be the highest Call and Put concentration levels. Highest Call OI is at 11200 and the maximum Put OI concentration is at 11000. This translates into probability of a ranged move; however, the RBI’s Policy Review will have markets reacting to that as well. The Volatility Index, INDIAVIX, slipped by another 1.04% to 23.5675.

Thursday is likely to see a tentative start to the day. The levels of 11065 and 11200 will act as resistance points; the supports will come in at 11040 and 10935 levels.

The Relative Strength Index (RSI) on the daily chart is 59.40; it stays neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below its signal line.  A spinning top occurred on the candles. Spinning tops are made of session which have little difference between the open and the close price. Such candles often portray a indecisive approach of the market participants.

While staying well inside the upper rising channel, the NIFTY continues to show vulnerability at higher levels. As of now, the 200-DMA, which is presently at 10854, is a major support for the Index on a closing basis.

RBI Policy review will have markets reacting in a volatile way in the morning. However, given the expiry of the weekly options, watching 11200 and 11000 would be crucial for the day. We recommend staying stock specific and no attempt to blindly chase the up move. We will see isolated stock specific performance coming our way. However, broadly speaking, the markets may trade range bound. Only a corrective move is expected to make the range wider.

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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