Stock Market

Trade setup: Expiry-led volatility likely; Nifty must hold 100-DMA

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After stellar rally in the past few sessions, the bulls completely surrendered to the bears on Wednesday, with NSE Nifty ending 148 points or 1.28 per cent lower at 11,440.20.

The market showed signs of exhaustion, as the index remained in a falling trajectory throughout the day. Nifty had created a substantial gap between Friday and Monday, and this zone partially got filled on Wednesday. We expect a subdued start to the trade on Thursday, as the corrective phase of the market will persist for some time.

The gap, which is partially filled, may get entirely filled over the coming days as per the current technical structure. Wednesday’s low, which coincided with the 100-DMA at 11,413, will be an important level to watch. Thursday’s session is likely to see a quiet start, and 11,490 and 11,550 levels will act as resistance points.

Supports may in at 11,400 and 11,310. The RSI on the daily chart stood at 59.85 and stayed neutral, showing no divergence against the price.

The MACD remained bullish and traded above its signal line.

Apart from a black candle that emerged, no significant formations are seen on the candles. The pattern analysis of the daily chart showed that Nifty has taken support near the 100-DMA level on a closing basis, which is at 11,413.

Any closing below this level will extend the corrective phase. We have expiry of the current derivative series on Thursday, and this is likely to keep the session volatile.

The 11,500 strike has the highest Call open interest (OI), while 11,400 strike holds maximum Put OI. Unless a tactical shift happens on either side, Nifty may oscillate within this range.

Any change of OI below 11,400 in Put will invite further weakness. The probability of the market extending corrective action is high and given this setup, we recommend traders to keep purchases very selective and limited. (Milan Vaishnav, CMT, MSTA is a Consultant Technical Analyst at Gemstone Equity Research - Advisory Services, Vadodara.

He can be reached at This email address is being protected from spambots.

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