Trade setup: Nifty remains prone to profit booking at higher levels

The domestic stock market on Wednesday failed to capitalise on a strong opening, as the NSE Nifty gave up over 110 points gain to end near the flat line.

From the technical perspective, Nifty has defended the 50-DMA level on a closing basis despite breaching it intraday. As long as the 50-stock pack is able to defend this level, some possibility of a technical pullback cannot ruled out, as the index mildly trades oversold on the short term charts. Weekly expiry of options will also play out during Thursday’s session.

Dalal Street is likely react to the US Federal Reserve’s policy decision. However, this is most likely to remain a non-event beyond a point.

Thursday’s session is likely to see 11,745 and 11,810 levels act as stiff resistance. Supports may come in at 11,650 and 11,580.

The RSI on the daily chart stood at 46.23 and it remained neutral, showing no divergence against the price. The RSI was seen taking support near a trend-line that joined lower tops earlier.


The daily MACD was bearish, as it traded below its signal line. No vital formation was seen on the candles.

The pattern analysis showed that after having slipped below the short term 20-DMA, Nifty is attempting to take support at its 50-DMA, which is at 11,681.

The expiry of weekly options might infuse some volatility into the trade on Thursday. The options data show an unclear picture as highest Put open interest interest was at the 11,700 strike while Nifty has ended a few points below this. If the Nifty manages to stay above 11,700, this level may become support during the session. On the other hand, the index has high Call open interest built-up at 10,750 and 10,800 strikes.

We recommend using downsides for making select purchases, though in very modest quantities. Despite possibilities of a pullback, Nifty continues to remain prone to profit taking at higher levels.

While refraining from taking any aggressive bets on either side, a cautious view should be maintained for the day.

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