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Thursday Trade Setup: NIFTY Stages A Breakout; Staying Above This Level Will Bring Incremental Gains

After opening on a modestly positive note, the NIFTY struggled for the half of the session trading in a range bound manner before breaking out of the crucial resistance zone. The NIFTY found itself in the positive territory at open, but for nearly half of the session, it traded below 11500 levels. However, the second half of the session saw the NIFTY piercing the 11430-11500 resistance zone with conviction which allowed the NIFTY to post some more incremental gains on expected lines. The headline index managed to end near its high point with gains of 77.35 points (0.67%).

Wednesday’s session remained technical important. The NIFTY has not only taken out the Double Top resistance at 11430 successfully, it has also filled the gap that existed in the 11430-11500 zone. We approach the expiry of the monthly derivative series as well as the weekly options expiry on Thursday. Massive Put writing at 11400, 11450 and 11500 levels saw the supports shifting higher for the NIFTY; 11500 strike holds maximum PUT OI as of today. NIFTY’s behavior against this level will be important because, if NIFTY keeps its head above 11500 level, we can expect some more incremental gains coming our way.

Thursday is likely to see the levels of 11590 and 11675 acting as resistance points. Supports come in at 11500 and 11430 levels.

Daily RSI stands at 68.07; it has marked a fresh 14-period high which is bullish.  RSI remains neutral and does not show any divergence against the price. The daily MACD has shown a positive crossover, it is now bullish and trades above the signal line. 

The pattern analysis has confirmed the NIFTY staying in the upward rising channel, and at the same time, has also taken out a double top resistance at 11430. There are higher chances of the NIFTY putting on more gains so long as it stays above 11500 mark.

All in all, the Index has attempted a major breakout on a larger double top pattern and has also filled out the gap that was created in the 114300-11500 levels.  This makes the level of 11500 a short-term support and we will see NIFTY moving higher so long as it stays above 11500. We recommend continuing to ride the up move. However, we also expect the leadership to come for financial stocks and banks. It is also expected that the defensives like FMCG and Consumption which had been consolidating may see improving their relative performance against the broader markets. A cautiously positive outlook is advised for the day.

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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