Trade setup: Nifty may make incremental highs, but do not let your guard down

The domestic stock market remained in a secular upmove on Thursday, as NSE Nifty ended with decent gains. The session was dominated by the year’s first expiry of weekly options as the index defended the 12,200 level, which triggered robust short covering. The 50-stock pack finally settled 99.70 points or 0.82 per cent higher at 12,282.20, a fresh closing high.

The headline index, which is a whisker away from its lifetime intraday high, is likely to see incremental upmoves in initial trade on Friday.

The market is showing signs of losing strength at higher levels, and it would be prudent for traders to protect profit even as Nifty manages to add gains.


Friday’s session is likely to see a stable start, with 12,300 and 12,365 levels acting as resistance points. Support may come in lower at 12,220 and 12,180.

The Relative Strength Index (RSI) on the daily chart stood at 61.61 and marked a negative divergence against the price. Nifty has marked a fresh 14-day closing high, while the RSI did not. The daily MACD stayed bearish and traded below its signal line.

Pattern analysis showed that the market’s range breakout is still in play. Chances of the index marking incremental highs cannot be ruled out, but it needs to improve momentum. The 12,100 level continues to be the most critical support level on a closing basis in the short term.

All in all, Nifty may attempt to make incrementally highs on Friday, but unless momentum improves, it will continue to remain vulnerable at higher levels.

We would recommend traders to follow upmoves carefully and protect profits at higher levels. A cautiously positive outlook 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)