Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Likely To Continue To Consolidate; These Levels Crucial If Full Throwback Occurs

In a structured day of trade where the option writers controlled the trajectory of the markets, the Indian equities continued to consolidate and ended flat with minor loss. The NIFTY saw a positive opening to the day. However, it marked the day’s high in the very early minutes of the trade. The index pared all its gains in by afternoon and slipped in the negative territory. The afternoon trade saw some pullback, but the second half of the session saw the index oscillating in a very capped range. After listless day and with no directional bias, the benchmark index NIFTY50 ended the day with a minor loss of 7.55 points (-0.07%).

The weekly options dominated the trend as the option writers thoroughly controlled the intraday trajectory. The maximum PUT and CALL OI stood at 11500 and 11600 strikes respectively; this ensured that the NIFTY does not move beyond a defined range. The market breadth was not as strong as it should have been. The rapidly declining volatility again becomes a point to remain alert on; the INDIAVIX declined again by 2.85% to 20.5025. 

Friday will see the levels of 11590 and 11635 acting as resistance points. The supports come in at 11480 and 11410.

The Relative Strength Index (RSI) on the daily chart is 60.59; it stays neutral and does not show any divergence against the price. The daily MACD is bearish; it stays below the signal line, but the slope of the Histogram is narrowing again for the better. No important formations were noticed on the candles.

The NIFTY is seen clinging on the lower rising trend line of the channel that it is presently placed into. Apart from hanging above this pattern support, more importantly, the NIFTY is above the 11430-11450 mark, which it took out as a double top resistance while surging ahead.

The NIFTY’s keeping head above the 11430-11450 levels would be very crucial, even if it suffers a complete throwback post taking out this double top resistance a couple of days back. Going ahead, over the next couple of days, it will be prudent to focus on the defensive stocks and sectors like FMCG, Consumption, Non-Discretionary stocks, a select pharma names, etc. This will help cushion any corrective volatility the markets may face. In the event of any resumption of  up move, we recommend staying highly stock specific and vigilantly protect profits at higher levels.

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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