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  • Milan Vaishnav, CMT, MSTA

Friday Trade Setup: NIFTY Stays In This Consolidation Zone; Lack Of Directional Bias May Persist

The markets seemed to be in no hurry to breach its double top resistance level of 12103 as it ended the day with a loss after coming off from the morning highs. The NIFTY opened on a resilient note and traded near the upper range of the day. By late morning trade, it saw some volatile reactions to the RBI Credit Policy Review, which surprisingly kept the key interest rates unchanged. The markets pared its morning gains reacting to gains while the afternoon trade saw recovery from the lower levels again. The recovery also did not sustain, and the NIFTY saw some corrective move again and finally ended the day with a net loss of 24.80 points –(0.21%).

The RBI kept a larger emphasis on rising vegetable prices, sustained price pressure on essential commodities, a rising inflation expectation of household and volatility in the domestic financial markets. Subsequently, it also raised the inflation projection for the second half of the current fiscal year to 5.10% – 4.70%. The markets which had taken a rate cut of 25 bps as a grated, gave up its gains and in the process. NIFTY has delayed the breakout in the near term though it has held on to the important short-term 20-DMA level as of now, which stands at 11983.

Friday is likely to see a tepid start to the day, and the levels of 12065 and 12110 will act as immediate resistance zone for the markets. The supports come in at 11950 and 11910.

The Relative Strength Index (RSI) on the daily chart is 57.34; it stays neutral and shows no divergence against the price. The daily MACD is bearish and trades below its signal line. A black body occurred on the candles, while the PPO stayed negative.

The pattern analysis shows that the NIFTY has so far failed to break above the double top resistance of 12103 despite giving incremental highs. Presently, it has stayed in the broad consolidation zone of 12100-11800 levels.

All in all, the NIFTY is slated to remain in this broad consolidation zone unless the levels of 12100 are taken out comprehensively on a closing basis. Unless this happens, we will see the NIFTY trapped in the present consolidation zone. We recommend taking moves on either side cautiously as the markets are devoid of any directional bias as of now. We expect such consolidation to linger on for some more time. We recommend keeping positions at moderate levels and avoid any excess leverage unless the markets establish any directional bias.

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