Trade Setup: Focus on relatively stronger pockets; cautious and stock-specific approach advised

On a listless day of trade with a bearish undertone, the Indian equity markets ended on a negative note after opening with gains. The Nifty opened on a positive note on the expected lines. However, it marked its intraday high point in the early minutes of the trade. The index gradually slipped into the negative territory in the late morning session.

The markets continued to make gradual lows and went close to psychologically important 16,000-levels. No recovery was seen towards the end. The headline index ended with a net loss of 99.35 points (-0.62%).

We enter the expiry day of the current month’s derivative series. The session will stay dominated by rollover-centric trades. The strikes of 16,100, 16,150, and 16,200 saw consistent call writing taking place. The level of 16,200 holds the maximum Call OI concentration as of now. This means that unless there is a tactical shift, the upsides will stay capped at 16,200 levels. The opening of the Nifty and the intraday trajectory that it develops will remain crucial to dictate the trend on the expiry day.

Thursday is likely to see the levels of 16,110 and 16,220 acting as potential resistance levels. The supports come in at 15,940 and 15,850 levels. The trading range is expected to get a bit wider as well.

The Relative Strength Index (RSI) on the daily chart is 40.35. It is neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line. A black candle emerged while forming a lower top and lower bottom. It showed the negative trend that persisted during the day.

The pattern analysis shows that the Nifty continues to stay within the broad trading range formed between 15,700-16,400 levels. Unless either of these levels is breached, markets will continue to stay in this broad trading range with no sustainable directional bias.

All in all, the markets are in a wide trading range and it is likely to continue to oscillate in this wider range. It is very much possible that the markets oscillate without taking any definite directional bias.

It is strongly recommended that one must continue to focus on relatively stronger pockets — a few high beta names like banks, financials, etc, may try to relatively outperform the broader markets. Along with these pockets, which would show highly stock-specific performance, defensive packs like FMCG, Consumption, and PSE are also likely to show relatively stronger performance against the broader markets. A continued cautious and stock-specific approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of and (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])

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