Gemstone Equity Research & Advisory Services

Thursday Trade Setup: Weekly Expiry May Keep NIFTY Both Range-bound & Volatile; Stay Light

In a relatively resilient day of trade, the Indian equity staged a range-bound move before ending the day with a modest cut. Following the overnight weakness in the global markets, the Indian equities saw a weaker opening. After opening negative, the NIFTY plunged to the day’s low of 11185 by afternoon. The second half of the trade, however, was spent in recovering from those levels. Despite staying range-bound throughout the day, the Index recovered nearly 100-odd points from the low. The headline Index finally settled with a net loss of 39.35 points (-0.35%).

What we saw over the past couple of days in form of a sharp correction is the mean-reversion of the markets. The markets, which had deviated too far and got overstretched on key technical indicators, reverted back to the mean through a sharp correction. On Wednesday, the NIFTY bounced off from near the 50-DMA, which presently stands at 11154 and this remains a crucial support on a closing basis. Volatility stayed under check as the India Volatility Index, INDIAVIX, declined marginally by 2.17% to 22.2300.

Thursday is likely to see a shaky start to the day. Any pullback in the Dollar Index may have some mild effect on the domestic markets, though it will be good for IT Stocks. The levels of 11310 and 11385 as resistance point. The supports will come in at 11230 and 11180.

The Relative Strength Index (RSI) on the daily chart is 48.17; it shows a bearish divergence against the price while it formed a new 14-period low. The daily MACD stays bearish and trades below the signal line. No important formations were seen on the candles.

The pattern analysis shows NIFTY well below the double top resistance point of 11430. The index has presently bounced back from near the 50-DMA and this remains a crucial and immediate support at Close. As of now, the index trades above all its key moving averages.

All in all, the session will stay dominated with weekly options expiry. There are near similar Call Options OI at 11400 and 11500 levels with 11500 holding the maximum Call OI. Highest PUT OI is at 11000 followed by 11200 level. There are chances that we see the index oscillating in a defined range for the day. We recommend avoiding any excess exposures. It would be prudent to ward off the weekly expiry through limited exposures along with strict guarding of profits on either side.

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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