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Thursday Trade Setup: NIFTY See High Call OI Added At This Point; Keep These Things In Mind While Following Up Moves

It was a day of fierce consolidation once again for the markets as the NIFTY traded negative for the entire day but recovered to end the day to end the day on a flat note. The markets saw a modestly negative opening and gradually kept losing ground throughout the day. The afternoon trade saw the NIFTY slipping below the 11500 mark as well. However, the last hour and a half of the session saw the NIFTY recovering over 100- points from the low point of the day. The NIFTY recovered all its losses and also briefly crawled inside the positive territory. The headline index finally ended flat with a negligible gain of 1.35 points (+0.01%).

The NIFTY might have ended flat; it has made a lower top and lower bottom on the daily chart. The market breadth did not remain so strong; 23 of 50 stocks declined within the NIFTY index. We enter the expiry of the weekly options series; moves will remain dominated with option centric activities. 15700 saw a million shares of Call Open Interest being added; 15700 level also holds a maximum Call OI with total Open Interest at 4.8 million. Unless a tactical change occurs, this is likely to act as a resistance for the next trading day.

Volatility went on to decrease; INDIAVIX came off by another 1.02% to 17.2100. This remains at one of its lowest levels and near the points seen only in early 2020, and it also remains a near-term concern for the markets. Thursday will see the levels of 15600 and 15665 acting as resistance; supports will come in at 15480 and 15400 levels.

The Relative Strength Index (RSI) on the daily chart is 68.90; it is neutral and does not show any divergence against the price. The daily MACD is bullish and above its signal line. No significant formations were seen on the candles.

The pattern analysis shows the breakout above 15430 active, valid and in place. However, the NIFTY is consolidating at higher levels, and it is likely to consolidate and even probably see a throwback which may see the levels of 15430 being tested again. Though the Wednesday’s trade saw the NIFTY pulling back from 15459 levels.

Overall, with breakout not taking a logical directional bias and with volatility at multi-month low, it would be prudent not to take the present breakout for granted. It would be wise to continue to follow the up move while staying highly stock-specific in the approach. Profits should be guarded at higher levels. Volatility is likely to spike up in the coming session and this will need a highly vigilant and cautious approach towards the markets.

This was first published by The Economic Times

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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