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Thursday, June 24, 2021

Trade setup: Nifty in a firm uptrend, will remain turbulent below 11,500

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Contrary to expectations, the expiry of weekly options remained a strongly trending one, as Nifty ended the session on a strong note. The market opened on the anticipated lines and traded in a range with modest gains. However, after the late morning trade, the trend got stronger. Nifty tested the double pattern resistance point near 11,430, corrected from there, and again pulled back to close above that level.

The index maintained its levels near the high point until the end of the session. The index finally ended the session by posting a strong gain of 171.25 points, or 1.52 per cent.

There are two important factors to take note of as we approach Friday’s trade. First, out of Nifty’s 171-point gain, nearly 140-points came from only one stock, i.e., RIL. Secondly, the index has again entered a resistance zone between 11,430 and 11,500 levels and will have to clear it by moving past 11,500. Until that happens, the index will continue to face the possibility of consolidation and may stay turbulent below these levels. Banking and financial stocks underperformed the headline Nifty index relatively. Volatility declined as India VIX came off 4.35 per cent to 21.2625.

On Friday, Nifty is likely to see the 11,500 and 11,585 levels act as key resistance points, while supports will come in at 11,400 and 11,315 levels. The Relative Strength Index, or RSI, on the daily chart stood at 55.85. It remains neutral and does not show any divergence against price. The daily MACD is bearish and it remains below the signal line. A Rising Window emerged on the candles. This was created by a gap on the upside and implies the continuation of the uptrend. The index needs a confirmation at the next trading bar.

Pattern analysis shows Nifty is outside the upward rising channel. However, the index has attempted to take out the Double Top resistance again that existed at 11,430 level.

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All in all, Nifty will be in a very turbulent zone as long as it remains below 11,500. No doubt it has again taken out the Double Top resistance point at 11,430, but staying above that would be critically important for the index. Not only this, there is a lurking fear that the Dollar Index may rebound and it can cause some rough patch for Nifty. Besides, the market, in general, stays in a firm uptrend and trades above all key moving averages. We reiterate staying highly stock specific and focus on consumption, pharma and other defensive stocks for the immediate near term.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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