Thursday Trade Setup: Volatility Likely To Stay; NIFTY To Keep Itself In A Broad Trading Range
Indian equities had an overwhelmingly volatile start to the week as the markets extended its losses on Monday. The markets saw a modestly positive start to the week, and the NIFTY remained in a defined range while continuing to consolidate on the expected lines. However, the afternoon trade brought in intense volatile and at one point in time, the NIFTY was off over 200-points from the high point of the day. Some late afternoon recovery was seen, and the index ended with a cut of 114.55 points (-1.00%).
Speaking of the immediate short term, the NIFTY bounced back from the 200-DMA level which presently stands at 11407. This remains the most crucial level to watch over the coming days. Given the shorts that were added in the system, the markets may continue finding support near the 200-DMA; the upside moves, though, shall continue to remain capped.
A flat to a modestly negative start to the trade is likely on Thursday as the markets would open after a gap of one day. The expiry of the weekly options also comes up tomorrow, and this will infuse its share of volatility as well. The maximum Call OI is at 11600 strikes 11400, and 11300 strikes represent the highest and second-highest Put OI concentration.
The levels of 11405 and 11465 will be resistance points for the markets will supports come in at 11300 and 11335 levels.
The RSI on the daily charts is 55.13; it stays neutral and does not show any divergence against the price. The MACD stays above the signal line, and the PPO remains positive.
The pattern analysis shows that the gap that we created over the past couple of days because of a sharp up move has got filled following the corrective move in the markets. Currently, the index has bounced back from the 200-DMA and going ahead; this level will be a critical level to watch.
Given the amount of shorts that are seen, it is likely that the markets may keep finding supports from lower levels. However, the upsides, in any case, will remain limited. The markets will continue to encounter selling pressure from higher levels. We recommend continuing to approach the markets in a highly cautious manner and avoid aggressive positions on either side.
Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)