Trade setup: Stay stock specific, avoid aggressive shorts for now

In yet another disappointing session, the domestic stock market on Wednesday gave up early gains to again settle in the red. NSE Nifty fell 65.05 points or 0.58 per cent to 11,157.

The index has settled just above its 100-DMA, which stands at 11,135. Its 200-DMA is at the 11,036 level.

This 100-point zone has formed a very important and crucial support for Nifty from the immediate short term perspective.

The opening of the 50-stock pack on Thursday and its behaviour against the 100-DMA will determine the trend for the day.

Thursday’s session is likely to see 11,210 and 11,290 levels act as an immediate resistance. Supports may come in at 11,135 and 11,035. With the volatility increasing to record levels, the trading zone has become wider.

The Relative Strength Index (RSI) on the daily chart stood at 33.9183 and it remained neutral showing no divergence against the price. The daily MACD stayed bearish and traded below its signal line.


A big black body emerged on the candles. Apart from signifying weak trend during the session, it did not form any major pattern on the charts.

Over the past three sessions, Nifty has taken support at its 100-DMA. It halted its decline twice and bounced back once from this area. The 11,135 level continues to remain an important support.

We expect Thursday’s session to remain volatile on account of weekly options expiry. The volatility index VIX has hit levels last seen during 2014.

We recommend traders to stay very light on positions. They also must not resort to aggressive shorting as Nifty treads near the important support zone. A highly selective and stock-specific approach is advised 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)