Trade Setup: Market vulnerable now, Nifty50 may extend decline

Nifty had dragged its resistance point lower to 11,300 from 11,500 level on Wednesday itself, as the session saw a shift of maximum open interest to 11,300 level. Amid F&O expiry, Thursday’s session saw Nifty open strong, but it failed to capitalise on that. The index never moved past the 11,300 level. After trading sideways in the first half, Nifty came off over 200 points from the high point. There was a minor recovery from the low point of the day, but the headline index still ended with a net loss of 100.70 points, or 0.90 per cent.

There are chances of a mild pullback in Friday’s early trade. However, the broader trend is likely to remain weak and the market may extend its downside a little more. The 11,300-11,350 zone has become a strong resistance point from a near-term perspective. The market has shown that it remains vulnerable at higher levels. For any sustainable up-move to occur, Nifty has to move past the 11,300-11,350 zone. Volatility too rose, as INDIA VIX surged 3.28 per cent to 24.9050.

On Friday, the 11,135 and 11,180 levels are likely to act as key resistance points for Nifty, while supports will come in at 11,050 and 10,960 levels.

The Relative Strength Index (RSI) on the daily chart stood at 62.09, marking a fresh 14-period low, which is a bearish signal. The RSI remains neutral, as it does not show any divergence against price. The MACD has turned negative. It is now bearish as it trades below the signal line.


Pattern analysis shows the bulls succumbed as Nifty approached the upper trend line of the rising channel. That said, the index trades comfortably above all key moving averages with the 200-DMA, which is currently 10,861, acting as its nearest support on a closing basis.

Given the sharp drop seen in the previous session, Nifty may see mild pullbacks. Apart from that, for any strong move to occur, the market will have to move past the 11,300-11,350 zone. Until that happens, all up-moves should be used more to protect profits at higher levels. A cautious and stock-specific approach is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at [email protected])