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Friday Trade Setup: This May Lead To Some Consolidation In NIFTY; Focus May Shift To Defensives

Markets spent a range-bound session on the expiry of the current derivative series and ended on a flat note with marginal gains. The NIFTY opened positive and moved higher but marked its intraday high point in the morning trade. After that, the second half of the session was spent in a very narrow range again, but in a declining trajectory. While coming off its highs, the NIFTY pared all its gains by the end of the session. In the session that was governed by the weekly options expiry, the headline Index ended with negligible gains of 9.65 points (+0.08%).

Thursday’s session remained technically important. The 11600-level held maximum CALL Open Interest concentration throughout the day which ensured that the NIFTY does not move past that level by close. The supports, which existed earlier at 11500 in form of highest Put OI shifted higher to 11550. This made the NIFTY stay in a very capped range in the afternoon trade. The volatility declined as INDIAVIX came off by 2.16% to 18.8850. 

Friday may see a tepid start to the day with the levels of 11600 and 11635 acting as resistance points. The supports come in at 11500 and 11410 levels.

The Relative Strength Index (RSI) on the daily chart is 68.39; it stays neutral and does not show any divergence against the price. The daily MACD is bullish as it trades above the signal line. A black body occurred; no other formations were noticed on the candles.

Going by the pattern analysis, though the NIFTY has  broken out above 11430 which was the double top resistance and has also filled the gap that existed between 11430-11500, there are some mild signs of fatigue visible again. However, the Index stays well within the upward rising channel.

There are chances that the NIFTY may see some consolidation and it is expected to take some breather before it moves past 11600 again. If that happens too soon, we will see the NIFTY trading in overbought zone again. That being said, the banking stocks relatively outperformed the broader markets on expected lines. Going ahead, we will also see FMCG and Consumption stocks waking up from slumber. We recommend to now shift focus to defensive stocks as we approach the markets going ahead from here. 

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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