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After taking a day’s breather, NSE Nifty was back to losing ways on Thursday, as the index gave up early gains to end 78.75 points or 0.70 per cent lower at 11,234.55.
The index also slipped below its key support level.
Bank and financial stocks plunged to grossly underperform the frontline indices.
Weekly options expiry and concentration of maximum Put open interest at 11,200 ensured the index settles above this level.
However, it slipped below its critical support of 200-DMA, which stands at 11.268.
The behaviour of the index against this level will be important to watch in the coming sessions.
If it is not able to move past this level, some more weakness cannot be ruled out.
The market on Friday is likely to see a tepid start with 11,270 and 11,345 levels acting as resistance.
Supports may come in lower at 11,180 and 11,050.
The Relative Strength Index (RSI) on the daily chart stood at 50.77 and continued to stay neutral, showing no divergence against the price.
The daily MACD remained bearish and traded below its signal line.
A black body was formed on the candles, and apart from this, no other formations appeared on the charts.
The pattern analysis of the daily charts showed that Nifty has given up nearly 50 per cent of its recent gains.
It remains in the corrective mode, and despite the sharp technical pullback, it has not been able to keep its head above 200-DMA at 11,268.
There has been a substantial increase in volatility over the past couple of sessions, which is expected to persist.
The market will keep seeing bouts of short covering as well.
However, the recent decline came with shedding of open interest and some long unwinding from higher levels.
The broader technical setup remains weak, and this makes Nifty vulnerable to volatile selloff at higher levels.
Keeping this in mind, we recommend traders to keep overall exposures at modest level and protect profits.
A cautious view is advised for the day.
(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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Trade setup: Nifty50 likely to fall further if it stays below 200-DMA
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