Gemstone Equity Research & Advisory Services

Friday Trade Setup: Important For NIFTY To Stay Above This Pattern Resistance Point; Has A Turbulent Patch Ahead

Contrary to the expectations, the weekly options expiry day remained a strongly trending one as the NIFTY ended the day on a strong note. The markets opened on anticipated lines and traded in a range amid modest gains. However, after the late morning trade, the trend got even stronger. The NIFTY tested the double to pattern resistance point near 11430, corrected from there, and again pulled back to close above that level. The index maintained its levels near its high point until the end of the session. The NIFTY finally ended while posting a strong gain of 171.25 points (+1.52%).

There are two important factors to take note of as we approach Friday’s trade. First, out of 171-point gain of NIFTY nearly 140-points came from only one stock, i.e., Reliance. Secondly, the Index has again entered a resistance zone of 11430-11500 and will have to confirm the clearance of this zone by moving past 11500. Until this happens, NIFTY will continue to face possibilities of a consolidation and may stay turbulent below these levels. Banks and financial stocks underperformed the headline index relatively. The volatility declined as INDIAVIX came off by 4.35% to 21.2625.

Friday is likely to see the level of 11500 and 11585 acting as resistance point. The supports come in at 11400 and 11315 levels.

The Relative Strength Index (RSI) on the daily chart is 55.85; it stays neutral and does not show any divergence against the price. The daily MACD is bearish as it remains below the signal line. A rising window emerged on the candles. This is created by a gap on the upside and implies a continuation in the uptrend; it requires a confirmation on the next trading bar.

The pattern analysis shows the NIFTY outside the upward rising channel. However, the Index has attempted to take out the double top resistance again that existed at 11430 level.

All in all, the NIFTY is currently in a very turbulent zone so long as it stays below 11500. No doubt it has taken out the double top resistance point of 11430 again but staying above that would be critically important for the NIFTY. Not only this, there is a lurking fear of a Dollar Index rebound which can cause some rough patch for the NIFTY. Besides this, the markets, in general, stays in a firm uptrend and trades above all key moving averages. We reiterate staying highly stock specific and focus on consumption, pharma and other defensive stocks for the immediate near term.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

Go Back


Previous Editions