Trade Setup: D-Street riding global trend, chase momentum cautiously

Much on the anticipated lines, the Indian stock market inherited a buoyant overnight trade setup. It opened with a large gap-up and remained strong throughout the session. It maintained a strong breadth, and saw gains across the board before ending yet another session on a strong note. Sectors across the board saw gains, as Nifty continued to post incremental gains throughout the session.

While it showed no sign of retracement, the index maintained the gains all through the session. Nifty finally ended with a gains of 211.80 points, or 1.78 per cent.

The rally we are seeing over the past couple of sessions is driven purely by reaction to the US election outcome. It would be rather useless or irrelevant to analyse the market on technical parameters, which may take a backseat – as does F&O data -- when the market ‘reacts’ to any major external event.


In Thursday’s session, despite the expiry of weekly options, the market saw no volatility at all. In fact, volatility fell sharply with INDIA VIX declining 9.63 per cent to 20.9650.

Friday’s session may once again open heavily influenced by overnight trade setup. However, the FO data showed large concentration of Call Open Interest at strike prices 12,150 and 12,250. In the event of any bounce, we can expect these two levels to act as key resistance. Supports exist at 12,000 and 11,950 levels.

The daily RSI stood at 64.91. It showed a bearish divergence against price. While the price has marked a 14-period high, the RSI has not done so. The daily MACD has turned bullish, and it now trades above the signal line.

A Rising Window has occurred on the candles. This has resulted out of a gap-up, and such candles usually resolve in furtherance of the move. However, given the current technical setup, this will require confirmation on the next trading day.

As we go into the next session, the momentum can be followed in its directional move. That said, such momentum chase should be done with utmost caution, and with every rise, profits should be protected. Without getting carried away or feeling left out, it would be prudent to approach the market with a lot of caution.

(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)