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Thursday Trade Setup: NIFTY To Consolidate More; These Levels Would Be Crucial

On the second last day before the expiry of the weekly options, the markets traded absolutely on the anticipated lines. They opened on a quiet note and stayed ranged in the first half the session. The second half of the session saw some sharp profit taking from the higher levels. The NIFTY came off over 200-points from the high that it had marked in the opening minutes of the trade.  However, in the last hour and a half of the trade, the NIFTY recovered bulk of its losses as it rebounded nearly 100-points from the low of the day. The headline index finally ended the day with a net loss of 53.25 points (-0.38%).

The strike of 14200 saw a massive 2.3 million quantity of the call writing during the day. This makes this level a point where a maximum Call OI stands at a total of over 5 Million. Unless there is a tactical shift, this level will act as a resistance in the next session. The coming session will stay influenced with the weekly options expiry. The maximum Call OI stands at 14000 levels. The volatility continued to increase as the INDIAVIX surged higher by another 2.61% to 20.9950.

The markets will inherit overnight trade setup as it steps into Thursday’s trade. The levels of 14200 and 14245 will act as resistance points. The supports come in at 14060 and 14000 levels.

The Relative Strength Index (RSI) on the daily chart is 73.51; it stays neutral as it shows no divergence against the price. The daily MACD is bullish as it trades above the signal line. Apart from a black body that emerged, no other formations were seen on the charts.

All and all, the analysis for the coming session will continue to remain on the similar lines. The undercurrent remains buoyant but given the overextend texture of the markets, some more ranged consolidation cannot be ruled out.

While the markets consolidate on the broad range, on one hand, there are ample signs of the markets staying largely buoyant as per the derivates data. On the other hand, any consolidation that happens should not come as a matter of surprise because any such activity would be healthy for the markets in the long rung and would make the current strong move healthier that it is at present. The session would influence with the rollovers, the range of 14000-14200 would be crucial for the markets going ahead from here. We recommend continuing to approach the markets cautiously and avoid high-beta stocks while staying put with defensives on a stock-specific basis.

This was first published by The Economic Times

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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