Trade setup: Nifty50 may extend rally, must hold above 200-DMA

Forming a temporary base, NSE benchmark Nifty on Wednesday recovered over 120 points from the day’s low to end 32.60 points or 0.29 per cent higher at 11,118.00. The index settled July on a dismal note losing 670.85 points or 5.69 per cent.

The fall in the morning session made Nifty test its eight-month-long pattern support area near the 11,000 level. Although the index did not move above 200-DMA at 11,148, the recovery ensured that the headline index stayed within the filters of the level.

There are a few fundamental factors that will influence Thursday’s session. We have US Federal Reserve meet, in which the central bank is expected to cut interest rates by at least 25 basis points. Apart from this, we also have weekly options expiry and this will impact the market as well.


Nifty is precisely at the midpoint of the band, which is seen from the options data. The options data showed maximum Call open interest at 11,000, followed by 11,100 strike, and the maximum put open interest was at 11,300 strike. While Nifty remained precisely in the middle of this band, and a move beyond 11,300 may not happen unless there is a significant shift in Put open interest.

Technically, there are very high chances that we see this pullback getting extended.

Thursday’s session will see 11,150 and 11,265 levels act as resistance while support may come in at 11,050 and 11,000.

The Relative strength index (RSI) on the daily chart stood at 29.20 and remained in oversold territory. The RSI stayed neutral against the price and appeared to be bouncing off its pattern support. The daily MACD is bearish and stayed below its signal line.

The 11,000 level has become a base in all probability, and we will see Nifty attempting to inch higher with 11,000 as important pattern support. Unless Dalal Street reacts to any global newsflow, there are chances that we see the pullback getting extended.

It would be crucial for Nifty to move past and sustain above 200-DMA, which is at 11,148. We recommend traders to avoid shorts and maintain a cautiously positive view for the day.

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