Trade setup: Nifty50 may stage a pullback; stay light on positions
Thursday’s session is likely to see 11,000 and 11,050 levels act as resistance.
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The headline index stayed within a defined range. After failing to clear the strong resistance zone that lies between 20-DMA and 200-DMA, it resumed its slide once again.
We may some intermittent technical bounce in between, but it will be no surprise if Nifty tests its immediate lows of 10,780. The weekly expiry of options will also dominate the trade on Thursday.
With the current decline, the overhead resistance points has shifted lower. Thursday’s session is likely to see 11,000 and 11,050 levels acting as resistance. Supports may come in at 10,890 and 10,830.
The Relative Strength Index (RSI) on the daily chart stood at 37.35 and stayed neutral, showing no divergence against the price. The daily MACD remained bullish while trading above its signal line.
A large black body was formed on the candles. Its occurrence near 11,000 -- which is one of the pattern resistance levels -- adds to the credibility of this resistance point going ahead.
We expect some volatility to persist on Thursday. We have weekly options expiry lined up, and this will influence the session as well.
As per the weekly options data, the maximum Call open interest was at 11,100. Ordinarily, Nifty is not expected to move past beyond this point. Maximum PUT open interest stayed at 10,900 unless any major tactical shift is observed.
Even if we see any initial bounce, Nifty continues to remain extremely vulnerable at higher levels. No aggressive long positions should be taken until it moves past 200-DMA, which is at 11,190. Until this level is taken out on a closing basis, all long positions should be protected vigilantly at higher levels.
(Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)