Trade setup: Elevated Nifty PCR level signals more consolidation

The NSE benchmark Nifty on Thursday opened on a mildly positive note, but soon after this, it slipped into the red and spent the rest of the session in a narrow range. The index got weaker during the fag end and ended the day with a net loss of 58.40 points or 0.54 per cent.

The Thursday’s session saw the Nifty extending weakness, but it continued to trade comfortably above its critical supports.

As we approach Friday’s trade, expect some stability to come in the market. Even if there is a tepid and tentative start to the trade, 10,630-10,650 levels are likely to provide cushion to the market. Nifty at present rests at its short-term supports. Expect the levels of 10,745 and 10,785 to provide resistance to the index. Supports are expected to come in at 10,650 and 10,610 zones.


The Relative Strength Index (RSI) on the daily chart is 54.4640, and it has just reached its lowest value in the last 14-days, and this is bearish. Nifty also showed bearish divergence against the price. Daily MACD has shown a negative crossover, and it is now bearish while trading below its signal line. A big black candle emerged on the candles. However, in the present context it is likely to be less harmful, as it has not occurred immediately after an upmove.

The pattern analysis shows the steady retracement of Nifty after it attempted to breakout from the 10,500-10,600 levels, which represented the upper and the multiple resistance areas for the market.

NIFTY at present rests at the short term 20-DMA, and is likely to seek some support in the vicinity of this zone. Overall, the rising crude prices and ever-strengthening US 10-year bond yields are doing more damage to the market than the external political events.

With the political events behind us, the market in general is focussing more on legitimate technical setups than anything else.

The elevated levels of Nifty PCR too point towards some more consolidation.

That said, we will continue to see sector-specific outperformance. With no structural damage as of now, focusing on right stocks with sound setups will likely be rewarded in such a volatile market.

STOCKS TO WATCH: Long positions were seen being built in stocks like Sun Pharma, Granules, BHEL, Coal India, Bajaj Finance, Bajaj Finserv, Ujjivan, Equitas, Wipro, Hindustan Zinc, Marico, Petronet and SAIL.

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