Gemstone Equity Research & Advisory Services

Thursday Trade Setup: NIFTY Below Crucial Levels; Weekly Options Expiry Point Towards These Levels To Watch

For the second day in a row, the Indian equity markets continued to consolidate below the important resistance levels before ending the day with modest gains. The markets opened on a quiet note and traded flat for the initial minute before slipping in the negative territory to mark the low point of the day. It soon crawled back in the positive territory and after that, it stayed in a defined range for the rest of the session. The NIFTY oscillated in a very limited range and refused to take any directional call. The headline index finally ended with a minor gain of 25.15 points (0.22%).

We have weekly options expiry coming up and Thursday will be the last trading day of the week. Friday is a trading holiday on observance of Gandhi Jayanti. The level of 11200 has seen significant amount of PUT writing and this level is likely to extend some support to the markets. The level of 11000 holds highest Put OI followed by 11200, while maximum Call OI is seen on 11400 followed by 11500 levels. The NIFTY is below its 50-DMA and this level will continue posing resistance on a closing basis.

Thursday is likely to see the levels of 11320 and 11400 acting as immediate resistance points. The supports come in at 11200 and 11060 levels.

The Relative Strength Index (RSI) on the daily chart is 48.78; it remains neutral and does not show any divergence against the price. The daily MACD stays bearish and below its signal line. A spinning top occurred on the Candles. No other formations were noticed apart from this one which indicates lack of directional bias among the market participants.

The pattern analysis shows that following the failure to move past and sustain above the double top resistance levels of 11430, the NIFTY has dragged its resistance points lower from above. In the event of any continued up move in the markets, this level will pose serious resistance at higher level. The NIFTY also stays below its 50-DMA which is presently at 11306. This makes the 11300-level crucial to watch over the immediate short-term

All in all, this makes the 11300-11430 Zone a critical resistance zone for the markets going ahead from here. Unless this zone is taken out convincingly the markets are unlikely to show any sustainable up move.  All up moves leading to this zone will encounter profit taking bouts at higher levels. There is clear shift in risk-tolerance of the market participants. The weak US Dollar and preference for less risky and low beta stocks will see stock specific moves in defensive quarters. We recommend approach the markets cautiously with vigilant protection of profits at higher levels.

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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