Gemstone Equity Research & Advisory Services

Thursday Trade Setup: Need To Critically Observe NIFTY's Behavior Against These Levels Given The Technical Setup and Options Data

The euphoria that was seen in the previous evening on SGX NIFTY failed to live up through the night. The session on Wednesday was important as it not only kept the markets in the defined range, also highlighted the importance of any given technical setup. Following the PM’s address of a stimulus package in the previous evening, the domestic markets saw a gap up opening in the morning. However, soon, the front line index came off nearly 200-points from the opening highs and spent the rest of the session trading in a sideways trajectory. The markets eventually ended with a net gain of 187 points (+2.03%).

Despite a gap up opening, if we look at the line charts with a technical perspective, the NIFTY has halted exactly at its 50-DMA, which presently stands at 9393. Also, the session also highlighted the vitality of the resistance in the zone of 9450-9500 levels. We have weekly expiry of the options coming up on Thursday; the data suggest a maximum concentration of Call OI at 9500 levels. So, 9500, and the level of 50-DMA at close would be extremely vital to observe.

A stable start to the day cannot be ruled out on Thursday. The levels of 9445 and 9500 will act as strong resistance points. The supports will come in at 9335 and 9220. Any down move will make the trading range wider than usual.
The Relative Strength Index(RSI) on the daily chart is 52.16; it continues to stay neutral and shows no divergence against the price. The daily MACD is bullish as it trades above its signal line.
A rising window emerged on the Candles. Such a candle results out of a gap on the upside and has bullish implications. However, in the present case, with the open and the high being the same and the candle being a large black body, it may not have desired bullish implications.
The NIFTY continues to hang precariously outside the rising wedge pattern. After falling off the wedge initially, the NIFTY has stayed in a defined range instead of coming down, showing a lot of directional indecisiveness. The markets continue to face a lot of uncertainty, and this continues to keep our analysis on similar lines. The markets are again likely to see a few positive moves, but again, these upsides should not be chased. While protecting profits at each higher level, the NIFTY’s behavior against the 50-DMA at close and against the zone of 9450-9500 should be critically observed.

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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