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Trade setup for Thursday: Volatility to persist; stay away from creating major exposures


Indian equity market witnessed highly volatile session on Wednesday. The Nifty oscillated in a wide 90-point range. Although the benchmark index ended the day losing just 27.60 points or 0.25 per cent, it was the broader market that witnessed much more pain.

Along with broader indices, auto and metal pack remained one of the worst performers.

As we approach Thursday, we need to approach market with extreme caution. One thing that remains evident is that the market remain structurally intact, there is no breakdown of any kind on the charts. However, the way volatility has crept in with the persisting pain in the broader market, the consolidation may remain quite difficult and painful as there have been exaggerated moves in the broader market.

Thursday will see the levels of 11,030 and 11,080 to work out as immediate resistance levels while supports can be expected at 10,950 and 10,910 zones.

The Relative Strength Index – RSI on the Daily Chart is 60.7125. It continues to remain neutral showing no divergence against the price. The Daily MACD stays bullish while trading above its signal line. No significant formations were observed on Candles.

If we look at pattern analysis, it continues to remain evident that market is consolidating post breakout above the falling trend line pattern resistance. From the present structure, it is expected that it will be a while before the market attempts to test its previous highs.

One important point to note is that the market ended above upper Bollinger band post its breakout. What we are witnessing is a typical temporary pullback inside the bands which otherwise signal strong possibility of continuation of breakout.

We expect consolidation to continue but inherent undercurrent continues to remain intact. We also expect volatility to persist and therefore recommend staying away from creating major exposures. However, shorts may be avoided, and each lower level may be used for making very select purchases. High degree of caution is advised for the day.

STOCKS TO WATCH: Fresh short positions were seen being built in stocks like Ashok Leyland, NCC, PNB, Tata Steel, Bharti Airtel, Tata Motors, Federal Bank, JSW Steel and TV18 Broadcast.

(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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