Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY Stays Near High Point; Keep Purchases Limited To This Universe

The equity markets witnessed a typically range-bound weekly options expiry influenced session while it ended the day with modest gains. Given the stable global trade setup, the markets saw a positive and stable start to the day. Not only did the NIFTY saw a stable start, but the Index also remained in the positive territory throughout the day and showed no intention to correct. Though the index did see minor blips; however, the overall session remained in capped range with the NIFTY oscillating in just between 100-odd points. The headline index finally ended the day with a net gain of 102.40 points (+0.65%).

At the start of the day, the highest Call OI was seen concentrated at 15800. This remained unchanged and kept the Index below this point. There was heavy Put writing seen at 15600 and 15700 levels; this saw the maximum Put OI shifting higher to 15700 levels. This ensured support to the NIFTY at 15700 levels. For the coming week as well, as of now the 15800 strike continues to hold maximum OI. The immediate high point for the Index is also 15800; this means that for a strong move to continue, the Index will have to move past his point. Until this happens, there are chances that the market faces strong resistance at this point.

Friday is likely to see the levels of 15780 and 15820 acting as resistance points. The supports will come in lower at 15640 and 15550 levels. In the event of any corrective move happening, the trading range is expected to get wider than usual.

The Relative Strength Index (RSI) on the daily chart is 68.31; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line; however, the narrowing slope of the histogram shows deceleration of momentum for the NIFTY.

An inside bar occurred on the charts. This also translates into a Harami pattern on the Candles. This shows a likely weakness especially when it occurs near the high point. However, in any case, this will require a confirmation on the next bar on the charts.

Moving on from here, the NIFTY stays in an uncharted territory; however, in the same breadth, it has shows mild signs of formation of a temporary top at 15800. It is recommended to refrain from making aggressive purchases regardless of the trend unless the NIFTY moves past is previous highs. All new purchases, from now on, should be made in modest quantities and should be kept limited to low-beta defensive stocks. A continued cautious outlook is advised for the day.

This was first published by The Economic Times.


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