Trade Setup: 11,945 & 12,000 resistance points for Nifty; stick to defensive stocks

The domestic equity market on Thursday remained within a limited range and ended the day with a modest loss.

After a negative opening, Nifty stayed in the red zone throughout the day. The index, however, remained within a defined range and saw itself oscillating back and forth within a 70-point range. The market maintained a falling trajectory throughout the day but did not make any major directional move on the either side. The headline index ended the day with a loss of 41.20 points or 0.35 per cent.

The session was heavily dominated with weekly expiry of options. The maximum Put OI was at 11,800 level which prevented Nifty from slipping below it.


From a technical perspective, this session once again resulted in the formation of an Inside Bar. This was also the fifth such consecutive session which stayed within the range of a large 'mother bar' formed on October 15th.

Volatility index India VIX cooled off by 1.22 per cent to 22.635. Market movement over the past 6 sessions have highlighted the 12,000 level as a stiff resistance point.

Friday's session is likely to see the levels of 11,945 and 12,000 acting as resistance points, while support will come in at 11,810 and 11,750. With limited upsides, any corrective move will make the trading range wider than usual.

The Relative Strength Index or RSI on the daily chart is 60.95; it is neutral and does not show any divergence against
price. The daily MACD is still bullish and trades above the Signal Line. The trading range remained within the previous day's trading range and resulted in the formation of a Spinning Top; which typically has a small real body with little difference between the opening and the closing price and denotes a potential reversal if it occurs near a
resistance point.

The pattern analysis shows the formation of a broad consolidation zone with 12,000 at the upper edge. This level, unless taken out convincingly, will act as a stiff resistance point going ahead from here.

We will see FMCG, consumer non-discretionary, and other defensive stocks showing good relative strength over the next few days. We recommend staying put with defensives, keeping leveraged exposures at modest levels, and guard profits vigilantly at higher levels. A continued cautious approach is advised for the day.

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