Trade setup: Nifty50 likely to turn cautious ahead of long weekend

The expiry of weekly options kept Dalal Street in a highly defined range on Thursday. Yet, the indices extended their up-move and ending the day with modest gains. Nifty saw a positive and stable opening to the day and remained in a rising upward trajectory in the first half of the session.

However, Call and Put writing at strike prices 9,100 and 9,000 ultimately kept the market within this range. Nifty came off its highs in the second half of the session and closed with a gain of 39.70 points, or 0.44 per cent.

Nifty has halted near the 50-DMA, which currently stands at 9,112. The 50-DMA may act as resistance on a closing basis; the behaviour of the index against this price level at close will be very important to watch over the coming days. If Nifty manages to move past and close above the 50-DMA, it may extend itself to the falling trend line. However, it will not result in any change of trend, which currently remains downward.


Nifty is likely to face resistance at 9,145 and 9,190 levels on Friday. Supports will come in at 9,050 and 8,960 levels.
The Relative Strength Index (RSI) on the daily chart stood at 48.01; it remsins neutral and does not show any divergence against price. The PPO remains negative. The daily MACD remains bearish as it trades below its signal line. A small white body emerged on candles as Nifty ended higher than it opened. This can be classified as a Spinning Top, given the small size of the real body. This remains insignificant in the current technical setup.

Pattern analysis shows Nifty again is consolidating below its immediate resistance point of 50-DMA, which currently stabds at 9,112 and is expected to act as a support on the closing basis. If the Index moves past this level, then it can extend its up-move to a limited extent.

We have an extended weekend this time, as Monday is a trading holiday. There are possibilities that Nifty will wear a cautious look ahead of Friday's close because of the extended weekend. We reiterate the need to approach the market cautiously.

It would be prudent to keep chasing the up-move, if any, through defensive and resilient sectors and stocks and protect profits vigilantly at higher levels.

(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)