Trade Setup: Nifty may consolidate near 15K; chase momentum judiciously

On anticipated lines, the domestic equity market got some breather following almost over 800 points of a pullback rally this week and ended the day with a minor gain.

The setup was buoyant, and the headline index Nifty had a strong opening in morning trade. However, the market thoroughly failed to capitalize on the buoyant opening that it received in the initial trade. The index marked its intraday high in early seconds of the trade, and after that, gradually pared all its gain by afternoon. There was a pullback after that, and the index spent the rest of the session in a very defined range. The headline index finally ended with a minor gain of 30.35 points or 0.20 per cent.

The session remained thoroughly dominated with rollovers and options expiry. The opening of the index was near 15,000; this level held highest Call OI throughout the day and it did not allow the index to move past this point. Volatility also increased as India VIX rose by 3.21 per cent to 23.3050. NIFTY PCR across all expiries stood at 1.34. The levels of 15,000 not only held the highest Call OI for next week, but it also coincided with channel resistance on the charts. There are higher chances of the index facing resistance and consolidating near this point.


Friday's session is likely to have a tepid start to the day. The levels of 14,950 and 15,030 will act as strong resistance points while supports would come in at 14,810 and 14,770.

The Relative Strength Index (RSI) on the daily chart stood at 56.61; it made a new 14-period high which was bullish. The daily MACD was bullish and stayed above its Signal Line.

The pattern analysis shows that the index resisted exactly at the falling trend line channel resistance on the daily charts. This makes the level of 15,000 a major immediate resistance for Nifty. As long as the index is below this point, it will see some consolidation or profit taking bouts from higher levels.

Overall, the analysis for Friday is much on similar lines. We reiterate that all further up moves should be utilized to protect profits at higher levels rather than making fresh purchases. Momentum should be chased judiciously by looking for stocks with improving relative strength and not by following those stocks which have run up too hard. We recommend continuing to approach the market on a highly cautious note.

(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)