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Thursday Trade Setup: NIFTY To Stay In A Range; Caution May Weigh Ahead Of A Long Weekend

In a corrective move, the Indian markets gave back half of Tuesday’s gains as it ended the day with a cut. On anticipated lines, the steeper Bond yield and the strong US Dollar played its part on the emerging markets in general. The NIFTY opened on a negative note on expected lines and spent the first half of the session in a sideways trajectory and within a defined range. The afternoon trade saw some incremental weakness creeping in as the NIFTY dipped lower. The index slipped below the 14700 levels; it showed no intention to recover and finally ended the day with a net loss of 154.40 points (-1.04%).

The NIFTY remains in a defined channel as evident from the charts. The Wednesday’s weakness seemed much of a technical nature as the session not only the last trading session of the month, but it was also a last trading session of the Quarter and the Financial Year as well which led to some tactical adjustments of the trade. On the monthly note, the NIFTY has ended gaining 161.55 points (+1.11%). Going ahead, we enter the weekly options expiry as well as the last trading day of the truncated week with Friday being a trading holiday on account of Good Friday.

While the 15000-level continued to see heavy call writing, the strikes of 14800 also saw some short Puts being unwound. As of now, while 15000 holds the maximum Call OI, the highest Put OI stands at 14500 levels.

The markets may possibly react to additional US stimulus details that will be out tonight. In any case, the levels of 14750 and 14825 will act as resistance points; the supports will come in at 14610 and 14550 levels.

The Relative Strength Index (RSI) on the daily chart is 48.28; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and is under its signal line.

The pattern analysis shows that the NIFTY is under a corrective retracement and it trades in a falling channel as evident on the charts. Apart from the upper trend line that may act as a pattern resistance in the event of any up move, the 50-DMA will stay an important resistance point for the NIFTY on a closing basis. The 50-DMA presently stands at 14774.

Regardless of any other technical setup, the behavior of the Index vis-à-vis the level of 50-DMA will be crucial on a closing basis. The markets stayed highly stock-specific, and some stock-specific outperformances were seen from IT, Pharma and select FMCG stocks. This texture of the markets is likely to persist for some more days to come. We recommend continuing to stay stock-specific and approach the markets on a highly selective note.

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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