Trade setup: Nifty50 still not out of the woods; 10,790 will be key

The NSE benchmark Nifty ended eight-day losing streak on Wednesday and staged a sharp rebound to end the session with decent gains.

Despite making a positive start to the trade, Nifty continued to resist the 100-DMA at 10,683 level for most part of the session. However, in the last hour, the index managed to cross this level and ended with a gain of 131.10 points or 1.24 per cent.

On Thursday, expect a positive start to the trade and the market may continue with the follow up rally. Though the up move in the initial trade cannot be ruled out, it would be important to see if Nifty is able to move past levels, which are important from the weekly charts point of view.


By the time we end this week, it would be important to see if the index manages to move past the 50-week moving average, which stands at 10,790.

With the current up move, the market has averted a structural weakness from creeping in. Thursday is likely to see the levels of 10,820 and 10,860 acting as resistance. Supports are expected to come in at 10,680 and 10,640 levels.

The Relative Strength Index (RSI) on the daily chart stood at 45.8745 and it remained neutral, showing no divergence against the price. The daily MACD stayed bearish, as it traded below its signal line.

A big white body emerged on the candles. It was important, as it has lent confirmation to Tuesday’s formation of an Inverted Hammer, which made a case of potential bullish reversal.

The pattern analysis showed that though Nifty showed a marginal breach of a major pattern on the daily chart, it has crawled back inside this broad range. It is all likely to move higher towards its 50-DMA and 200-DMA levels.

Unless the index again breaches 10,640 or slips below 10,680 on a closing basis, it has marked a potential bottom for itself.

Though the up moves from hereon may not be smooth for the index, as it still has critical resistance to cross, it has at least as of now, averted any immediate danger of breaking down.

We recommend continuing to chase momentum, but profits should be protected at higher levels.

Refrain from shorts and approach market with a positive outlook, as long as the zone of 10,640-10,680 is held on Thursday.

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