Gemstone Equity Research & Advisory Services

Thursday Trade Setup: NIFTY To Dance To Weekly Expiry Tunes; This Inference Can Be Drawn From F&O Data

Consolidation continued in the Indian equity markets but resolved on a positive note as the benchmark indexes ended on a positive note after spending most of the day in a directionless manner. The markets saw a quiet start to the day and oscillated in a very defined and limited range without taking any directional bias. NIFTY kept crisscrossing the previous day’s close level while heading nowhere in a definite way. It was the last hour and half of the trade that saw the key indices lifting themselves again. The NIFTY went on to end near its high point posting net gains of 64.75 points (+0.56%).

Thursday will have weekly options expiry coming up and the session is expected to stay dominated with these actions. Throughout Wednesday’s trade, the strike of 11500 saw addition of over 970000 shares in Put OI. With this, 11400 strikes hold maximum Put OI followed by 11500 levels. 11700 strikes hold maximum Call OI followed by 11600 and 11800 levels. What inference we can draw from this data is that while the downsides, if any, may stay limited. On the higher side, NIFTY has opened some room for a pullback. The INDIAVIX, which represents volatility, declined by 3.19% to 21.1050.

The coming day is expected to see a quiet start to the trade. The levels of 11590 and 11685 will act as resistance; supports will come in at 11465 and 11400 levels.

Relative Strength Index (RSI) on the daily chart is 61.02, it stays neutral and does not show any divergence against the price. The daily MACD is neutral remains below its signal line.  Apart form a white body that emerged, no other formations were noticed on the Candles.

While looking at the pattern analysis, now both the structure on the charts remain important. On one hand, it would be important for the NIFTY not to fall below the lower rising trend line of the channel. On the other hand, going past the double top resistance and after having suffered a full throwback, keeping its head above the 11430-11450 levels would be equally crucial over the coming days.

We recommend staying away from creating major positions on either side as the NIFTY is currently in a broad and volatile consolidation phase. Also, we expect the focus shifting to the defensive plays and the markets will continue remaining sector and stock-specific for the immediate near term. A careful chase of momentum on either side with protection of profits at every level 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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