Trade setup: 12,000-12,050 still key for Nifty; be on your guard
The Relative Strength Index stood at 66.74, and showed a bearish divergence against the price.
Thursday’s session will see expiry of weekly options, which paints a very interesting picture. There is an intense tussle at 12,000 strike. During Wednesday’s session, the 12,000 strike had more Put open interest (OI) than Call OI.
However, at the end of the day, 12,000 had the highest Call OI and 11,000 strike had the maximum builtup of Put OI. The bottom line is that Nifty is yet to move past the 12,000-12,050 zone comprehensively and close above this zone.
With the index remaining in a broad consolidation zone near its upper range, Thursday’s session is likely to see 12,040 and 12,110 levels act as strong resistance points. Supports may come in at 11,960 and 11,880 levels.
The Relative Strength Index (RSI) stood at 66.74, and showed a bearish divergence against the price, as Nifty made a fresh 14-period high, while the RSI did not.
The daily MACD stayed bearish and traded below its signal line. The Percentage Price Oscillator (PPO) remained negative.
A Doji pattern was formed on the candles. Doji has the same or near similar open and close prices, and forms a very small real body. If such a formation emerges during an upmove, which is the case now, it can stall the upmove. However, this would need confirmation on the next session.
As per pattern analysis, the market is just a whisker away from its lifetime high. While Nifty flirts with higher levels, the oscillators are showing fatigue and lack of strength required for a sustainable breakout.
The 12,000-12,110 zone remains a strong resistance area for the market.
As the headline index hasn’t achieved a clean breakout with strength, we continue to recommend traders to approach the market with caution.
Unless a firm and confirmed directional bias is established, excessive exposures on either side should be avoided, and profit should be guarded vigilantly.
Avoid overleverage and adopt a cautious view on the market.
(Milan Vaishnav, CMT, MSTA, is a Consultant Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)