Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Crucially Poised; Staying Above This Zone Important

The equity markets continued to falter on the expiry day of the monthly derivative series as it extended the losses of the previous session to end yet another day with a loss. The markets opened on a gap down but spent the morning session recovering from the opening lows. At one point in time, the NIFTY had recovered all its losses; however, the second half of the session saw the markets coming under pressure once again the Index slipped again very near the low point of the day. Following a modest recovery, the NIFTY ended with a net loss of 58.80 points (+0.50%).

The expiry dominated the session today. However, the maximum Put OI stood at 11600 levels which prevented the markets from slipping below it. From the technical perspective, the NIFTY has tested the lower edge of the broad trading range that the markets have formed and hangs precariously near that level. The NIFTY’s behavior against the zone of 11600-11630 would be crucial and the Index will have to stay above this to prevent any near-term breakdown. The volatility continued to inch higher as the INDIAVIX was up by 3.19% to 24.0225.

Friday is likely to see the levels of 11715 and 11785 acting as resistance points. The supports come in at 11600 and 11510.

The Relative Strength Index (RSI) is 49.16; RSI has formed a fresh 14-period low again and also shows a bearish divergence against the price. The daily MACD is bearish as it trades below the signal line.

Apart from a small white body that emerged, no major formation was noticed on the candles.

The pattern analysis shows that the NIFTY has staying for nearly nine days within the large trading range that it had formed during the session of October 15th. However, the index is testing the lower range and any breach of the lower range will result into more incremental downsides.

Given the two days of decline, any minor pullback happening cannot be ruled out. However, one will have to stay highly vigilant against the NIFTY’s behavior against the support zone of 11600-11630 levels. It would be imperative for the markets to stay above this zone to avoid incremental weakness. We reiterate approaching the markets with caution and keep leveraged exposure limited..

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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