Trade setup: Nifty likely to stay in a range; cut excessive exposure

Market continued with its upmove and reported yet another closing high, as the NSE benchmark Nifty ended with a gain of 20.70 points or 0.18 per cent.

The index has continued with its unabated rally, but off late the range has been getting narrower.

Thursday’s trade also saw the Nifty trading in a narrow 25-point range throughout the session. The volumes too have been either lower-than-average or heavily stock-specific in nature.


The upcoming session is likely to see a subdued start to the trade. In event of any uptick that may be seen in the initial trade, there are probabilities of the Nifty facing retracement from higher levels.

Friday may continue to see the levels of 11,495 and 11,530 acting as immediate resistance area. Supports may come in lower at 11,410 and 11,330 zones.

The Relative Strength Index (RSI) on the daily chart is 74.4825 and it continued to trade in the overbought territory. Apart from a black body that emerged on the candles, no major formations were seen.

Pattern analysis showed that the Nifty continued with its upmove post breaking above the 11,170-11,175 zones. At present, it trades overbought and stares at some imminent consolidation from the higher levels.

Overall, despite the buoyant structure and the unabated upmoves, if we speak of immediate short-term horizon, some retracement from higher levels is overdue.

Given the overbought nature on the charts, Nifty is staring at imminent retracement from the higher levels with each upmove. It is also important to note that though downsides, if any, may not be much, but volatility tend to increase during such corrective bouts that result into broader consolidation.

We recommend staying away from aggressive purchases and refrain from chasing the momentum blindly.

We recommend taking the market very cautiously and continue to maintain highly stock-specific approach for the day.

STOCKS TO WATCH: Stocks of Kaveri Seeds, Jay Bharat Maruti, National Aluminum, SAIL, DLF, Idea, Power Grid, JSW Steel, NCC, Ashok Leyland, Vedanta and Graphite India have relatively better technical setups.

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