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Friday Trade Setup: NIFTY May See Mild Up Moves; Broader Structure Remains Weak Because Of This

In the previous note, we had mentioned above the NIFTY dragging its resistance points lower to 11300 from 11500 as the session had seen shifting of maximum OI to 11300 levels. The expiry session on Thursday remained on expected lines. The NIFTY saw a strong opening to the trade but failed to capitalize on that. The index never moved past the levels of 11300. After trading sideways for the first half of the day, NIFTY came off over 200-points from the high point. After minor recovery from the low point, the headline index ended with a net loss of 100.70 points (-0.90%).

There are chances of a mild pullback in the initial trade on Friday. However, that being said, the broader trend is likely to remain weak and the markets may extend its downside little more. The zones of 11300-11350 have become a strong resistance zone from a near-term perspective. The markets have shown that it continues to remain vulnerable at higher levels. For any sustainable up move to occur, moving past of NIFTY beyond the 11300-11350 zone will be necessary. Volatility too rose, as the INDIAVIX surged by 3.28% to 24.9050.

Friday is likely to see the levels of 11135 and 11180 acting as resistance points. Supports come in at 11050 and 10960 levels.

The Relative Strength Index (RSI) on the daily chart is 62.09; it has marked a fresh 14-period low, which is bearish. The RSI is neutral as it does not show any divergence against the price. The MACD has turned negative; it is now bearish as it trades below its signal line.

The pattern analysis shows NIFTY giving up as it approached the upper trend line of the rising channel. However, that being said, the Index trades comfortably above all its key moving averages with the 200-DMA, which is currently 10861, acting as its nearest support on a closing basis.

All an all, given the sharp decline witnessed in the previous session, there may be mild pullbacks. But apart from that, for any strong move to occur, the markets will have to now move past 11300-11350 zones. Until that happens, all up moves should be used more to protect profits at higher levels. A cautious and stock specific approach 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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