Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Continues To Stay Precarious; May Get Weak If It Slips Below This Level

Despite the overnight global weakness, the Indian equities staged a resilient show but went on to end the day on a negative note. Following overnight weakness in the US Markets and prevailing weakness within Asia, the Indian markets saw a lower opening. However, the opening was on a negative note, but it was very resilient as compared to the other peers. The NIFTY stayed in the negative territory throughout the day but continued to defend the psychological 11500 levels. While the weekly options expiry played out, the headline index ended the day with a net loss of 88.45 points (-0.76%).

The highest Put OI concentration remained at 11500 level since beginning; this not only kept the NIFTY resilient than its peers but also kept its head above this point due to weekly options expiry. The NIFTY is trapped in a practically no-trade zone it has managed to keep its head above the crucial 11430 levels. So long as the NIFTY is able to stay above 11430, it may stay under consolidation but will not see any major weakness. Any incremental weakness will come only if the Index slips below the 11430 level once again. Volatility surged a bit as the INDIAVIX climbed by 2.24% to 20.1000.

Market may see a jittery start to the day. The level of 11550 and 11590 will act resistance. The supports will come in at 11450 and 11400 levels.

The Relative Strength Index (RSI) on the daily chart is 56.76; it stays neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below its signal line. However, the Histogram is seen narrowing its trajectory. A spinning top occurred on Candles. This usually results out of a small real body and shows indecisiveness of market participants.

The pattern analysis shows the NIFTY in a consolidation range and moving in a indecisive manner. Although it has taken out the double top resistance point of 11430, it is lacking the conviction that it needs to confirm a move above that point. As of now, the level of 11430 will act as a short-term pattern support for the markets. 

All in all, we recommend avoiding any aggressive positions in the markets. The market is presently consolidating and the possibilities of it moving higher are more so long as the NIFTY is able to keep its head above 11430 levels. However, unless the previous high point of 11620 is taken out, we will not see any strong moves coming in the markets. We suggest continuing to stay highly stock specific and avoid large exposures on higher side. From the risk-reward point of view, it would be rewarding to focus more on defensive stocks. A cautious view is advised for the day.

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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