Gemstone Equity Research & Advisory Services

Thursday Trade Setup: NIFTY To Stay Dominated With Weekly Option Expiry; These Strikes Have Even Concentration Of Call OI

After spending a considerable part of the session trading in a sideways trajectory, the oversold short-term indicators aided a sharp pullback in the markets, which saw the markets ending near their high point of the day. The markets opened positive and maintained modest gains while it oscillated in a capped range. The NIFTY moved range-bound, but in the second half of the session saw itself making a remarkable recovery. The Index managed to go well past the 9000-levels and managed to keep its head above it until the close. The headline index ended with a decent gain of 187.45 points (+2.11%).

Thursday session will remain highly dominated with the weekly options expiry. The exciting figures are thrown up by the Options data, which shows near-similar maximum Call OI concentration at 9100, 9200 and 9300 strikes. This means that NIFTY finding strong resistance at either of these levels just cannot be ruled out. Also, this also covers the 50-DMA, which is also a major resistance point on a closing basis; it presently stands at 9154 levels.

The Relative Strength Index (RSI) is 47.09; it stays neutral and does not show any divergence against the price. The daily MACD stays bearish as it trades above its signal line. A bullish engulfing pattern has occurred on the candles. However, the potency of such a formation may be doubtful as it has emerged just below a major resistance point, which exists in the form of a 50-DMA.
The pattern analysis does not point towards any major change in trajectory. The current setup stays bearish after the NIFTY fell out of the rising wedge formation. Having said this, the short-term indicators remain slightly oversold, and this may result in some more pullback happening. However, it is unlikely to result in any significant change of trend.
All in all, there are possibilities of some follow-up pullback continuing in the initial trade, which may extend itself a little bit. As a short-term trader, one may chase the extension of the uptrend, if it happens. However, at the same time, it would not be advisable to get complacent with the rally, and it is strongly advised to keep protecting profits at higher levels. A cautiously positive approach is suggested 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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