Trade setup: Nifty50 may look to stabilise; 11,170 level to be key

The market on Wednesday repeated its trading pattern of remaining rangebound in the first half of the session and then losing ground in the second half to end with heavy losses. The NSE Nifty in the previous remained rangebound for the major part of the trade and then slipped in the last hour and half to end 44.55 points or 0.39 per cent.

The market on Friday will open after a day’s gap, doing a lot of catching up with the global cues. We did not have much of the negative cues to deal. However, the Dollar Index cooled off a bit, and we might see domestic currency remaining stable and relatively less volatile.

Overall, there are chances of a mild pullback happening once again as we approach important support levels on the daily chart. We expect a stable opening on Friday with the levels of 11,270 and 11,335 acting as immediate resistance area, while supports will come in at 11,210 and 11,170 zones.


The Relative Strength Index (RSI) on the daily chart is 40.5565. It shows a bullish divergence as Nifty has marked a fresh 14-period low while RSI has not. Daily MACD stays bearish while it trades below its signal line. No significant formations were seen on the candles.

As per pattern analysis, it remains evident that the Nifty suffered a sharp mean reversion after running up much ahead of its curve. The Nifty now stares at important pattern support of 11,170, which is expected to act as important support.

As we enter trade on Friday, we expect some stability to return and we expect market to gain some ground in the first half of the session. However, unless a directional call on the upside is established, we will continue to remain vulnerable to profit taking bouts at higher levels.

However, given the fact that the market is nearing its supports, aggressive shorts should be avoided. In the immediate short term, the levels of 11,170 followed by 100-DMA will remain extremely crucial for the market. Cautiously positive outlook is advised for the day.

STOCKS TO WATCH: Shorts continued to get piled up on stocks like South Bank, Rpower, Idea, Adani Power, State Bank of India, Reliance Yes Bank, NTPC, HCC, Dish TV, Tata Motors DVR, Ashok Leyland, HDFC, NBCC and Bajaj Finance.

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