Nifty50 looks overstretched, may trade in a defined range on Friday

The expiry of September derivatives series infused a lot of volatility on Thursday, as NSE Nifty traded in a 100-point range during the session. After a day’s breather, the market resumed its upmove and the index ended with a gain of 131 points or 1.15 per cent at 11,571.20.

During the day, Nifty Bank saw a 1,000-point spurt, but gave up 700 points gain by market close.

Though a quiet start to the trade is expected on Friday, the volatility will continue to exist. The 100-DMA level, which is at 11,411, can be considered as an immediate and a major support in the event of consolidation.


On the upside, the 11,650-11,700 zone will be important to watch. Nifty appears overstretched on the short-term charts, and if it consolidates at current levels, it should not come as a surprise. Chasing gains remains a risky affair.

Friday’s session is likely to see 11,650 and 11,700 levels act as resistance. Supports may come in lower at 11,475 and 11,410. The trading range is expected to remain broader than usual.

The RSI on the daily chart stood at 62.76 and remained neutral, showing no divergence against the price. The daily MACD was bullish while trading above its signal line. PPO stayed positive.

The pattern analysis showed that Nifty paused after two steep upmoves and took support at 100-DMA. This level, going ahead, will remain an important support.

The index is showing a buoyant intent and looks highly overstretched on the short-term charts. Nifty has ended outside the upper Bollinger band. However, the bands are currently 80 per cent wider-than-normal, and any relentless move on the higher side will either become unsustainable or risky.

The market is likely to pull itself back inside the band and return to a less volatile range.

We recommend traders to remain highly stock specific, chase upmoves in a very cautious way and vigilantly protect profits at higher levels.

(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)