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Gemstone Equity Research & Advisory Services

Friday Trade Setup: NIFTY To Make Attempts To Stabilize; Strengthening Dollar Index Remains A Concern

The equity markets had a disastrous day of the trade as the expiry of the current derivative series literally saw the blood bath on the streets. The markets opened lower, got much weaker during the day, and ended with a deep cut. The NIFTY saw a gap down opening following overnight global weakness as well as weak Asian markets. It continued to trade with losses showing no intention to recovery. In the second half of the session, it got even weaker and briefly breached the 10800-level as well. In the end, the headline index took a deep cut and ended with a net loss of 326.30 points (-2.93%).

Thursday’s session has remained very damaging from the technical perspective. The rebound in the US Dollar Index has caused the equity markets go into a tailspin. The NIFTY has violated a crucial support zone on the weekly chart which was formed by the two weekly moving averages. On the daily chart, it has gone right near the 200-DMA which currently stands at 10762. Although the NIFTY has now come very near to this core support, it has certainly dragged major resistance point lower. The volatility spiked; the INDIAVIX surged by 12.32% to 23.5775.

Friday is set to see a jittery start to the day. The levels of 10880 and 10950 will act as immediate resistance points. The supports come in at 10760 and 10710 levels.

The Relative Strength Index (RSI) on the daily chart is 30.30; it has made a fresh 14-period low which is bearish. However, it is very near to being oversold and does not show any divergence against the price. The daily MACD is bearish and trades below its signal line. A large black body occurred on the candles signifying a heavily bearish session of the trade.

All in all, the NIFTY has not only flirted and violated a support zone on the weekly chart a bit but has also come very near to the 200-DMA on the daily charts. Given the present technical setup, it is highly unlikely that we may see this kind of unabated downside after such near vertical fall in the markets over the past couple of days. We strongly not to go further short in the markets blindly as a technical pullback cannot be ruled out. We continue recommending avoiding shorts, control exposures and approach the markets with a cautious approach. 

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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