Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY May Take Some Breather; These Sectors May See Extension Of Move

Despite relentless inflows the Indian equities took some breather today as it consolidated and ended the day with a minor cut. The markets saw a modestly lower opening. After a soft start the Index stayed in a capped range but kept on losing ground gradually. During the entire day, the markets never went into the positive territory. After marking the day’s low in the afternoon, the trade remained largely range-bound and the NIFTY ended with a net loss of 58.35 points (-0.46%).

The weekly options expiry dominated the closing of the markets. The levels of 12600 had a maximum Put OI and this caused a pullback the point near to this strike. However, the markets have showed a first sign of a fatigue at current levels. A clear sectoral preference was seen towards Consumption and FMCG stocks which witnessed buying in the second half of the trade.  These sectors may attract follow up move in the next session. The volatility subsided as the INDIAVIX declined 6.41% to 20.6200.

Friday may again see a soft start to the day. The levels of 12750 and 12830 will act as resistance point. The supports come in lower at 12310 and 12500 levels.

The Relative Strength Index (RSI) on the daily Chart is 74.40; it stays neutral and does not show any divergence against the price. The daily MACD is bullish as it is above the signal line.

A Doji occurred on the candles. This is a sign of a fatigue as the market participants failed to arrive at a consensus during the day. When Doji occurs following a strong up move, it may be a sign of a potential disruption of the rally. This will require confirmation on the next trading day.

The pattern analysis shows that the NIFTY has achieved the price targets derived using the classical technical methods following a breakout from the 12000 levels. Following the up move, the formation of a Doji indicates a possible break to the present unbated rally.

All in all, as mentioned in the previous note, the possible rebound and the sharp rise in the US10-YR Bond Yields too need to be closely watched as they can have negative repercussions on the domestic markets. This being said, the inflows that were triggered by the MSCI rejig may continue to attract buying on a stock-specific basis.  We reiterate paying attention of traditional defensives like IT, Consumption, FMCG and keeping exposures limited as all these will collectively lead to better risk-reward preposition in the current technical setup.

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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