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  • Milan Vaishnav, CMT, MSTA

Friday Trade Set-up: Corrective Bias To Persist; Keep Exposures Limited To Defensive Stocks

Amid range-bound but volatile trade, the markets continued its corrective trail as it ended yet another day with a modest loss. After opening on a positive note and remaining in a capped range the markets gave a volatile reaction to the RBI Credit Policy review that came with a rate cut of 25-bps. This was already discounted for and the markets did not take any directional call after the policy. After oscillating in a volatile range, the NIFTY continued with its corrective intent and ended the day with a net loss of 45.95 points or 0.39%.

The markets have marked a classical top on the day it tested its previous high and saw retracement from those levels. With the levels of 11760 getting confirmed an immediate top once again, there are higher chances that the markets may continue to show corrective tendency and all up-moves may also continue to meet with profit taking bouts.

Friday is expected to see a soft start and the levels of 11660 and 11710 acting as immediate resistance points. Supports come in at 11510 and 11420 levels.

The Relative Strength Index (RSI) on the daily chart is 65.1192 and it remains neutral while not showing any divergence against the price. The daily MACD remain bullish but it is likely to show a negative crossover in coming days as it is seen sharply narrowing its trajectory. Apart from a black candle that emerged, no significant formations were observed.

The pattern analysis of the daily chart shows that the NIFYT has marked a classical Double Top at 11761 as it saw sharp retracement after it tested its prior high of 11760. These two levels of the double top are nearly 7 months apart and this lends credibility to this formation and to the level of 11760 as the resistance point going ahead.

All in all, we expect a soft session tomorrow and the markets are not likely to show any run-away up-moves. The level of 11760 has reinforced itself as a major resistance point and all up-moves that lead to this level will remain vulnerable to profit taking bouts. We recommend remaining highly selective while making purchases and all fresh purchases should be kept limited to defensive stocks.

Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA / CSTA, Canada / STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)