Nifty: Trade Setup: Nifty consolidates further; holding 18000 level key to avoid major downside

Continuing to correct for the third day, the Indian equity markets ended the day with a loss despite a rebound from lower levels. The markets opened on a positive note and marked the day’s high in the opening minutes of the trade. Nifty50 soon pared its gains to trade flat in the first hour of the day and then slipped into the negative territory. The corrective pressure on Nifty50 continued and at one point it went very close to the 18000 levels, marking the day’s low at 18048. The index rebounded 13-odd points from lower levels before closing the day with a net loss of 88.50 points (-0.48 per cent).

The Nifty50 took 10 days to pile up its last 1000 points of gains and it just took three days to shed 600 points of the gain. Given this kind of wide-ranging corrective moves, Thursday’s session has remained technically important from one perspective. That is, with the markets rebounding from near 18000-levels, the consolidation range has now defined itself between 18000-18600 zone. We will not see any runaway up move unless the Nifty50 moves past 18600, and we will also not see any major downside as long as the Nifty50 keeps its head above 18000 levels.

Friday is likely to see a stable start to the day; we might see the markets trying to stabilize themselves and attempt a technical pullback. The levels of 18235 and 18300 will act as resistance points. The supports will come in at 18100 and 18050 levels.

The Relative Strength Index (RSI) on the daily chart is at 63.01; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line. Apart from a black-bodied candle that was formed for the day, no major formations were seen on the charts.

Nifty50 has defined a broad trading range for itself between 18000-18600 zone. This means that Nifty50 is likely to find supports near 18000 and may not see any major downside as long as it trades above 18000 levels. We may continue to see technical pullbacks near the lower edge of this zone. We recommend continuing to maintain controlled exposures in the markets. While avoiding aggressive shorts, all profits on either side should be vigilantly protected. Leveraged exposures should be kept modest; a cautious outlook is advised for the day.


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