Trade setup: Market may again find itself prone to profit-taking bouts

Nifty stayed in a defined range before ending the day on a modestly negative note. It opened higher and marked the high-point of the day in the first hour of the trade. The market could not maintain those gains and the index slipped in the negative territory by afternoon only to recover later.

The recovery took the market in the green but that was not sustained as well. Nifty slipped again and finally ended the day with a minor loss of 33.50 points (-0.19%).

The session remained typically influenced by the rollovers. The levels of 17,400 saw heavy put writing for the entire day. The levels of 17,500 had maximum accumulation of Call OI that did not change over the past several days.

All this kept the markets below 17,500 levels. As of now, from a technical perspective, the level of 17,500 continues to stay as a resistance point. Sustainable up move shall happen only if this level is taken out convincingly.

Not only on Friday, but for the next few coming days. Nifty’s behavior against the levels of 17,500 will be crucial to watch for any sustainable directional move. Friday is likely to see the levels of 17,500 and 17,585 acting as potential resistance points. The supports come in at 17,430 and 17,310 levels.

The Relative Strength Index (RSI) is 59.12. It remains neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line. A small black body emerged on the charts; no other important formations were observed.

ET CONTRIBUTORS

The most recent up move has seen Nifty moving past and trading above all its key moving averages. With these levels now being taken out, the level of 17,300 is expected to act as most immediate support for the markets on a closing basis.

All in all, some consolidation may again be on the charts; the most recent up moves are seen lacking the strength and momentum that is otherwise require for any sustainable directional trend to begin and sustain.

Having said this, the analysis continues to remain on the similar lines. The market may again find itself prone to profit-taking bouts unless it moves past the 17,500 level convincingly. Until this happens, it is strongly suggested to continue approaching the markets on a highly selective note.


(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)