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Thursday Trade Setup: Weekly Options To Dominate NIFTY Move; Stay Position-Light At Higher Levels

The markets ended on a flat note after a weak opening on Wednesday’s trade. Although the NIFTY managed to recoup most of the opening losses, it has still not managed to move past the 11300-11350 levels. After opening with a mild gap down, the markets marked its intraday low in the early trade and this point was defended throughout the session. The first half of the session saw the markets recovering most of the losses, while the afternoon trade was spent more in a range-bound way. While the Index never went in the positive territory, the headline Index ended the day with a minor loss of 14.10 points (0.12%).

NIFTY remains placed precariously near the resistance zone of 11300-11350. There is weekly options expiry coming up on Thursday and this will continue to keep the markets on tenterhooks. The strikes of 11300 saw maximum Put and Call writing on Wednesday and this keeps the possibility of the markets swinging either way on the weekly options expiry day. As of now, the 11500 and 11200 level hold maximum concentration of the Call and Put Open Interest respectively. Volatility slipped to its lowest levels in the recent past as the INDIAVIX declined by another 2.41% to 20.8450.

Thursday will see the levels of 11350 and 11390 acting as resistance points. Supports will come in at 11210 and 11170 levels.

The Relative Strength Index (RSI) on the daily chart is 67.92; it is neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below the signal line. A spinning top occurred on the candle. Spinning tops are formed out of session which has little price difference between the opening and the closing price; they often denote the state of indecision and lack of consensus among the market participants.

The Markets are showing mild signs of distribution happening at higher levels. The present technical setup shows that the NIFTY continues to remain vulnerable at current levels unless the zone of 11300-11350 is taken out convincingly. Also, strengthening Dollar Index may exert some pressure on the emerging markets as the Dollar Index is oversold on the short-term charts and this may inflict some temporary negative impact on the emerging markets. We recommend avoiding aggressive positions and continue approaching the markets with a high degree of caution.

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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