Trade setup: Indecisive Nifty, traders’ complacency send out ominous signal

Indian equities on Thursday ended flat with negligible loss. We had pointed out in our previous note that there was a large amount of Call and Put writing at strikes price 11,300. This continued as the weekly options expired and ensured that Nifty did not go anywhere from this point.

After enjoying a positive start to the session, Nifty gave up opening gains after the first two hours. It then spent the rest of the session moving in a capped range. The headline index ended with a minor loss of 7.95 points, or 0.07 per cent.

With Nifty heading nowhere, the outlook for Friday remains similar. Nifty has not been able to penetrate the 11,300-11,350 zone on last several occasions and this is a cause of concern. The market has been lacking a directional bias over the past few days. Along such sideways and direction-less move, volatility is falling.

India VIX declined by another 1.33 per cent on Thursday to 20.5675 and this does not paint a pretty picture. At present, it stays at one of its lowest levels in recent times. This remains a concerning factor as low volatility reflects complacency among market participants and may lead to some corrective moves.

Friday's session is likely to see a tepid start. The 11,345 and 11,380 levels are likely to provide strong resistance, while supports will come in at 11,235 and 11,180 levels. The Relative Strength Index (RSI) on the daily chart stood at 64.56; it remains neutral and does not show any divergence against price. The daily MACD remains bearish and trades below the signal line.


A Spinning Top occurred on the candles. The frequency of occurrence of Spinning Tops is also a cause of worry. Such sessions signal little price difference between open and close. Such candles are formed when there is indecisiveness among the market participants.

The banking and financial services stocks are likely to remain resilient. Along with this, some stock-specific outperformance may be seen from the midcap universe.

One can keep picking stocks carefully. But it will not be a good idea to get aggressive while long positions until Nifty moves past the 11,300-11,350 zone convincingly on a closing basis.

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