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Thursday Trade Setup: Weekly Options Expiry To Keep NIFTY In Defined Range; Selective Approach Is Advised

It was a positive day of trade for the Indian markets, as the NIFTY went on to extend its gains after half a day of consolidation. The markets saw a positive start to the trade and traded with capped gains in the morning session. At one point, after trading in defined range, the NIFTY gave up its gains to trade flat by afternoon. However, the markets picked up in the second half of the session; the NIFTY not only recouped its morning losses but got stronger as the day progressed. Moving past the psychological mark of 11600, the Index was able to maintain all its gains until the end of the session. The headline index ended the day with net gains of 82.75 points (0.72%).

Since the markets have ended near the high point, there are chances that it extends its gain at least in the initial trade. The NIFTY now trades well above the double top resistance point of 11430; these levels now become a short-term support for the market followed by the 50-DMA which presently stands at 11235. The NIFTY has raised its support to 11430 in the near-term following Wednesday’s move. The volatility continued to decline; INDIAVIX came off by 4.55% to 19.6600.

Thursday is expected to see the levels of 11665 and 11700 as resistance points. The supports come in at 11490 and 11430 levels.

The Relative Strength Index (RSI) on the daily chart is 61.90; it continues to stay neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below the signal line. However, the sharply narrowing slope of the Histogram point towards a likely positive crossover in the coming days. A white body emerged on the candles which signified a bullish trend during the day.

The pattern analysis shows the NIFTY attempting to move past the double top resistance levels. It has taken out this level again after failing in its first attempt. The second attempt has moved the immediate short-term support for the NIFTY higher to 11430.

Thursday will also see the weekly expiry playing out. The level of 11700 holds maximum Call OI. So, there are chances that if we do not have any overnight negative cues to deal with, we may see the NIFTY attempting to test the 11700 levels. The level of 11500 holds the highest Put OI, which shows that unless there is any tactical shift in the positions, the NIFTY may not go below these levels. Given the present technical setup, the NIFTY is likely to stay and trade in a defined range in the coming session. We recommend to continue approaching the markets with a selective approach.

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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