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  • Milan Vaishnav, CMT, MSTA

Friday Trade Setup: NIFTY In Uncharted Territory; Lead Indicators Point Towards Likely Consolidation

After showing corrective moves initially, the Indian equity markets continued their advance and ended with a modest gain. The markets saw a negative opening to the trade and stayed in the negative territory in the morning. However, the NIFTY recovered from the low point of the day to crawl in the positive zone. It inched a little higher and stayed positive for the rest of the day. Though the gains remained limited, the headline index ended with a net gain of 38.05 points (+0.31%).

The session remained predominantly affected by the expiry of the weekly options. The 12200 strikes saw the highest PUT OI built up for the whole day, which did not allow the NIFTY to slip below this level. On the other hand, the maximum Call OI above these strikes kept the markets extremely range-bound. The markets are showing fatigue at current levels and lacking the strength that it should otherwise have at this juncture of a breakout. It should be no surprise if the NIFTY halts its rally momentarily and consolidates at present levels.

Friday is likely to see a soft start to the day again. The levels of 12300 and 12330 will act as possible resistance points as the markets remain in uncharted territory. The supports will come in lower at 12190 and 12145 levels.

The Relative Strength Index (RSI) on the daily chart is 66.95; it continues to show bearish divergence against the price. The daily MACD is bullish and trades above its signal line. Apart from a white body that emerged, no significant formations were noticed on the Candles.

The pattern analysis shows the NIFTY breaking above the 12103 levels, which represented a major double top resistance point. However, with the NIFTY trading above 12103, this level has now become immediate support for the markets.

While the markets remain in structurally sound technical setup, the NIFTY stays overbought on a couple of short term indicators. The lead indicators are also exhibiting fatigue, and lack of internal strength and the market breadth is not so healthy as it should have been. The breakout remains in force so long as the index trades above the 12100 levels but there are chances that it consolidates at present levels. We recommend continuing to protect profits at each higher level.

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