Nifty: Trade Setup: Nifty has to top 15,900 level to get aggressive again

In a much resilient performance, the Indian equity market put up a strong show ahead of the expiry of weekly options and ended the day with modest gains. Following a relatively weak Asian trade setup, Nifty saw a modestly negative opening in the morning and spent the early session in range-bound mode, where the 50-pack oscillated back and forth around the previous close.

It was in the last hour-and-a-half of trade that took the index higher. Nifty saw some strength coming in and again came closer to its key resistance area. The headline index finally ended the session with a net gain of 61.40 points, or 0.39 per cent.

The market has weekly options expiry coming up. The general market trend is likely to be dominated by expiry of options. The 16,000 level has the maximum accumulation of Call Open Interest over the past many days and this level is expected to continue put up stiff resistance to any upside move.

On the other hand, significant Put writing was seen at 15,800 level. This makes the mid-point of 15,900 an inflection point for Nifty. The opening of the market and Nifty’s behavior against the 15,900 level will be crucial to watch.

The 15,900 and 15,965 levels are likely to act as immediate resistance points for Nifty in Thursday’s session, while supports will come in at 15,800 and 15,735 levels.

The Relative Strength Index (RSI) on the daily chart stood at 62.90; it showed a bearish divergence against the price. While Nifty marked a new 14-period high, the RSI did not, and this resulted in the bearish divergence. The daily MACD remains below the Signal Line in a bearish sign. A White Body emerged on the candles. Apart from this, no other significant formations were observed.

Pattern analysis showed Nifty has once again attempted to test and move past the crucial resistance in the 15,850-15,900 zone. While the index has closed in the middle of this zone, any move above 15,900 level will increase the possibility of the index testing the 16,000 mark.

All in all, investors need to approach the market cautiously despite a buoyant session. Nifty needs to move past the 15,900 level and stay above that to get a little aggressive again. In other words, as long as the index does not move past 15,900 level convincingly, it will remains vulnerable to bouts of profit taking at higher levels. Unless that happens, we recommend remaining highly stock-specific and selective in the approach.

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