Gemstone Equity Research & Advisory Services

Thursday Trade Setup: NIFTY To Stay Dominated With Expiry Moves; Resistance Points Have Been Dragged Lower

A session that can be called interesting from a technical perspective, the markets did all those things that it was expected to do. It did see a positive opening, attempted a pullback and at the same time also face a strong selling pressure at higher levels when it attempted to go near the 50-DMA. After opening on a strong note, the index witnessed a gradual decline and eventually pared all its gains. It also saw a sharp dip in the negative and went on to go near to the 11000 levels. However, recovery was seen in the last hour and half of the trade which saw the headline index eventually closing with a nominal loss of 21.80 points (-0.20%).

The NIFTY has closed below the lower Bollinger band. Even if the NIFTY pulls back inside the band temporarily, it is pointing towards a weaker technical structure unless the NIFTY climbs above the short-term 20-DMA. This has also seen the NIFTY bringing the resistance further down from 11430 to its 50-DMA, which is presently at 11294. Volatility continued to slide as the INDIAVIX cooled further by 2.45% to 20.8850.

Thursday is likely to see a stable start to the day. The levels of 11210 and 11245 may act as resistance points. The supports come in at 11060 and 11000 levels.

The Relative Strength Index (RSI) on the daily chart is 39.71; it stays neutral and does not show any divergence against the price. The daily MACD is bearish as it trades below its signal line. A black body appeared on the Candle.

The pattern analysis shows the NIFTY slipping below the double top level of 11430 and this has marked this level as a strong resistance point in the near term. The Index has also slipped well below the 50-DMA and its usual filter and this brought the resistance down further.

Thursday is also the monthly derivative expiry along with usual weekly options expiry. The 11000 level holds the maximum PUT OI and it is unlikely that the NIFTY goes below this point unless something drastically goes wrong. On the other hand, the highest Call OI is at 11300 levels. We expect the NIFTY to oscillate in this range. It would be necessary to keep a keen eye on US Dollar which is currently in the process of a mild technical pullback. While avoiding aggressive shorts, a continued cautious 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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