Trade setup: Nifty50 heading towards inflection point at 9,500; stay cautious

In a session that was more buoyant than expected, Nifty continued to inch higher with too many things happening too fast, as the index ended with substantial gains despite coming off its intraday highs. The market saw a positive and steady start to the session and gradually kept on inching higher. The late afternoon trade saw a spurt with the index spiking higher.

Although the market came off from the high point of the day, Nifty managed to end the day with a gain of 172 points, or 1.84 per cent. The entire session was governed by the weekly options setup, where the highest Put OI got shifted from 9,400 to 9,500 levels. Thursday's session will see the expiry of the weekly options as well as the current series derivative contracts.

Rollovers are expected to dominate the session. The price action of Nifty against the 9,500 level will be extremely crucial. Strike price 9,500 has the highest Put OI along with second-highest Call OI concentration; and this level is set to act as an inflection point for the session on Thursday. The India Volatility Index, India VIX, declined further by 4.29% to 33.8375.


Nifty is likely to see the 9,590 and 9,635 levels act as immediate resistance points on Thursday, while supports will come in at 9,410 and 9,365 levels. The Relative Strength Index (RSI) on the daily chart stood at 55.19. It marked a fresh 14-period high, which is a bullish signal. The RSI remains neutral and does not show any divergence against price. The MACD remains bullish as it trades above the signal line. The last couple of days has seen a deceleration in momentum as up-moves are coming with a downward slope on the Histogram.

The percentage price oscillator (PPO) remains positive. Pattern analysis showed Nifty has tested the upward rising trend line of the Rising Wedge pattern. The index is moving fast towards the apex of the present area pattern and may see some incremental highs, but remains vulnerable at current levels.

All in all, as the index test the upper trend line resistance of the Rising Wedge and options data shows an inflection point at 9,500, it is something that should not be taken lightly. Even if the market shows incremental upsides, it will get all the more vulnerable to bouts of profit taking at higher levels. Chasing of up-moves is making the risk-reward ratio absolutely unfavourable from current levels. In the event of any incremental up-moves, stay away from chasing them and approach the market with higher 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)