Home Market Trade setup: Niftys outlook positive; 10,540 level key on expiry day

Trade setup: Niftys outlook positive; 10,540 level key on expiry day

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The penultimate day of the expiry of the current derivative series saw the Nifty50 oscillating in an 80-point range. Stocks made a modestly negative opening and got weaker in the early trade. However, a sharp recovery followed, and after a ranged oscillation, the Nifty ended 18.95 points or 0.18 per cent lower.

For Thursday, we expect the market to trade in the similar range. The supports are likely to come in near 100-DMA level, which stands at 10,544. The market may face resistance near 10,650-10,680 zones.

The amount of shorts that still exists in the system is likely to come into play, as the session is expected to remain dominated with rollover centric activities. Thursday will see the levels of 10,650 and 10,680 playing out as immediate resistance areas. Support is expected to come in at 10,540, which is at Niftys 100-DMA, and after that near 10,500 level.

The Relative Strength Index (RSI) on the daily chart is 50.6014. RSI continues to stay neutral showing no divergence against the price. Daily MACD stays bearish while trading below its signal line. No significant formations were seen on the candles.

Pattern analysis shows that two important levels may come into the picture. First is the 100-DMA level, which may come into play as Nifty50 took support at this level in the previous session. Second, on the upper side, 10,650 level, which happens to be the multiple pattern resistance. The level may pose resistance in event of resumption of the pullback.

Overall, there are a significant number of shorts that were seen being added and they still continue to exist. We expect a quiet opening to the trade and a rangebound movements in the early part of the session. However, there are chances that the market sees sharp moves, as some short covering might happen.

The primary reason for this is the though the month of May continued to see addition of shorts, the month of June have been witnessing long rollovers. We recommend a cautious but positive view on the market for the day.

STOCKS TO WATCH: Favourable technical setup is observed in stocks like IDBI Bank, Indosolar, LT Foods, Coal India, Bliss GVK Pharma, Cummins India, Kitex and Astrazeneca Pharma.

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

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