nifty: Trade setup: Nifty may swing in a wide trading range until it crosses 17,000

It was a day of consolidation for the Indian stock market on Friday as the main Nifty index opened higher but ended up closing modestly lower.

After a positive start, the index ended up marking its high point of the day in the first minutes of the transaction. As the market maintained most of its gains in the first half, it ended up slowly paring all of those gains. Nifty drifted slowly and by late afternoon he slipped into the negative zone. The modest losses continued to exist until the end; the overall index closed with a modest loss of 43.70 points or 0.26%.

Nifty is likely to have a tepid start to Monday. The index rose above 16,400; this level is likely to act as major pattern support in the event of a corrective downward move. The market may have broken out of the wide 15,700-16,400 trading range, but it appears to have created another zone between the 16,400-17,000 levels. The market is currently inside from this relatively narrower range; any slip below 16,400 will again push the market into the wider trading range. Nifty’s price action against this level will be crucial to watch over the next few days.

Although a soft start to the day cannot be ruled out, the index should see resistance at the 16,650 and 16,760 levels, while support could come in at 16,500 and 16,380.

The Relative Strength Index (RSI) on the daily chart is 52.25; it remained neutral while showing no divergence from the price. The daily MACD remained bullish and above the signal line. Other than the blackbody that emerged, no other formations were seen on the maps. Overall, hesitant and slightly lukewarm behavior cannot be ruled out; there was some shedding of long positions from higher levels as indicated by derivatives data.

Current month nifty futures lost over 6.43 lakh shares or 6% in net OI. The reduction in OI came with the decline of Nifty; this indicates a likely unwinding of long positions at higher levels.

The market should stay in a range in the very short term; any sustained upside will only occur if the index can break above the 50-DMA and/or 17,000 levels globally. Until that happens, we will find that the market will stay and swing within a wide trading range. A highly selective and stock-specific approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a consulting technical analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based in Vadodara. He can be contacted at [email protected])

Garland K. Long