Nifty: Trade Setup: Nifty not out of the woods, stay vigilant

In what turned out to be an antidot to the previous session, domestic equities consolidated within a very narrow range with near-absent volatility. It traded in a very narrow range and ended the day on a positive note. The market saw a positive opening to the session; Nifty opened modestly higher and remained in a narrow 40-odd point range throughout the day. The market did not take any directional bias and maintained its modest gains throughout the day.

The headline index ended with a net gain of 69.05 points (+0.44 per cent). The session saw 15,800 strike holding maximum Call Open Interest throughout the day. The monthly derivative expiry remained quiet on the expected lines. The highest Call OI at 15,800 prevented Nifty from moving past this point. On a broader note, the market is still very much within the broad consolidation zone that it has formed for itself with the 15,900-15,950 zone as the major intermediate resistance for the market.

The volatility declined; INDIA VIX came off 5.45 per cent to 12.9450. On Friday and in the coming days, the broadly defined range for Nifty will be 50-DMA on the lower side and the 15,900-15,950 area on the upper side. On Friday, 15,835 and 15,880 levels are likely to act as key resistance for Nifty while supports will come in at 15,700 and 15,665 levels.

The Relative Strength Index (RSI) on the daily chart is 51.88; it remains neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line. No significant formations were seen on the candles.

Pattern analysis shows Nifty continues to remain in a rectangle formation; this formation is made from a broad consolidation zone with the 15,900 & 15,950 levels acting as resistance. Unless this zone is taken out convincingly, any meaningful bounce in the markets in unlikely.

All in all, from the intraday perspective, the zone of 15,500-15,550 is the lower edge of the consolidation zone for the markets. However, on a closing basis, taking support at the 50-DMA, which currently stands at 15,679 will be very crucial. Any slippage below the 50-DMA on a closing basis will invite some weakness for the markets.

With the markets not having taken any directional bias on the either side, the analysis for Friday remains on similar lines.

We reiterate the need of the hour to stay highly stock-specific while approaching the market. With vigilant protection of profits on either side, 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)