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  • Milan Vaishnav, CMT, MSTA

Thursday Trade Set-Up: Expiry May Remain Volatile; Holding On To 10720-10680 Levels Important

Uncertainty returned to haunt the equity markets as geopolitical tension resurfaced amid fresh skirmishes between India and Pakistan. The markets enjoyed a strong start and it got even stronger during the morning trade. However, it saw sharp paring of gains following news flow of renewed tensions between the two countries. The NIFTY not only pared all its gains but slipped further into the red. The index declined over 160-points from the high point of the day. While it showed no major recovery by the end of the session, the NIFTY settled the day with a net loss of 28.65 points or 0.26%.

Though markets are still within the broad range, the immediate short-term structure has shown few signs of cracks developing on the short-term charts. Despite remaining in the broad range, the NIFTY has failed to sustain above its 200-DMA which is presently at 10862. Also, a lower top is seen being formed at 10940 level. Unless this level is taken out again, we will see NIFTY trading with a weaker bias.

Thursday is likely to see a tepid start to the trade. We also expect the session to remain volatile owing to the expiry of the current derivative series. The levels of 10860 and 10940 are likely to act as resistance points while supports are likely to come in at 10750 and 10680 levels.

The Relative Strength Index (RSI) on the daily chart is 49.8946 and it remains neutral showing no divergence against the price. The daily MACD is bullish as it trades above its signal line. However, it is failing to show any upward momentum in the present situation. A black body emerged; apart from this, no significant formation is observed on candles.

Overall, given the geopolitical tensions, the markets are more likely to remain on tenterhooks and they are not expected to take any firm upward directional call. At the most, without any major structural breach on the charts, the markets may continue to remain in a broad trading range while continuing to remain volatile. We recommend keeping exposures at very modest levels and avoid any aggressive exposures on either side. While remaining highly selective, a cautious approach is advised for the day.

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