Trade setup: Nifty may continue to face hurdles from here on; remain light on positions

Trade setup: Nifty may continue to face hurdles from here on; remain light on positions

The domestic stock market had volatile expiry day trade on Thursday, as the Nifty50 index oscillated in a 150-point range during the session to end flat with a marginal loss. The market saw a negative start to the session ahead of the F&O expiry, but soon crawled into the green to trade with gains.

Nifty soon gave up the recovery, as it witnessed a decline to test the opening lows. However, Nifty50 saw some recovery again in the second half of the session with last hour of trade staying extremely rangebound. The index finally ended with a negligible loss of 16.40 points, or 0.16 per cent.

F&O expiry dominated the day’s market trend. Nifty had the maximum concentration of Call open interest at 10,500 level. Apart from this, the 10,400 and 10,500 levels saw high amount of Call writing during the session. This ensured that Nifty stays below 10,300 level at close. With the expiry out of the way, the 10,500 level has become an immediate top for the index in the immediate short term. Any sustainable up-move shall occur only after Nifty moves past this level convincingly. Until that happens, Nifty is likely to remain rangebound.

The 50-pack is likely to see a tentative start to Friday’s session. The 10,335 and 10,360 levels are likely to act as immediate resistance while supports will come in at 10,210 and 10,150 levels.

The Relative Strength Index, or RSI, stood at 61.92 on the daily chart. It remains neutral over a 14-day period, but if subjected to pattern analysis, it shows a bearish divergence against price. The daily MACD remains bullish and stays above the signal line. Apart from a white body that occured, no other significant formations were observed on the candles.

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Pattern analysis showed Nifty remains in an upward rising channel. However, it showed initial signs of weakness as it retraced without testing the upper trend line of the channel. Also, it has done so while creating a large Engulfing Bearish candle.

All in all, there are possibilities of intermittent up-moves, but that said, Nifty continues to display signs of weakness at higher levels. On Friday and thereafter, Nifty is likely to face resistance on every rise. Remain light on positions and keep protecting profits on either side. Usually, when the market displays signs of weakness, but a risk-on setup is at play, it tends to make the market movement more wide-ranging and volatile. A cautious view is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)

Source: ET Markets

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