Trade Setup: Nifty50 faces stiff resistance at 15,850-15,900 levels

Dalal Street had a relatively buoyant day of the expiry of the derivative series as it ended with modest gains on Thursday. The Nifty50 saw a quiet start to the day on expected lines. After opening on a positive note, the market spent the morning with range-bound moves while maintaining gains. The second half of the session saw the Nifty50 index get a bit stronger as it inched higher to mark an intraday high of 15,821.40. Following some retracement, it finally ended with a gain of 103.50 points (0.66 per cent).

The session remained dominated with the monthly derivatives expiry, and also the weekly options expiry. The 15,700 and 15,750 levels saw a good amount of put writing and call unwinding, which enabled the index to propel higher. On the other hand, the level of 15,800 held the maximum call open interest concentration, which made sure that the Nifty index settles below that point. The trading range remained narrower; volatility decreased, with the India VIX index coming off 1.74 per cent to 15.0975.

Nifty stays below the crucial resistance zone of 15,850-15,900 and these levels will continue to pose stiff resistance to the market in the immediate near term. Supports, on the other side, come in lower at 15,700 and 15,605 levels.

The Relative Strength Index (RSI) on the daily chart is at 62.67; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line. While an Inside Bar occurred on the charts, this has led to a formation of a Harami candle. This bullish Harami candle has little significance as it has emerged near the high point.

A pattern analysis shows that after breaking out from a falling channel, Nifty50 saw a buoyant move. However, at current levels, it has achieved its price measurement targets.

The current technical setup suggests that the Nifty50 index may have achieved its price measurement targets and may be in for some prolonged consolidation or some minor corrective moves. The index is continuing to exhibit some signs of fatigue at current levels. We recommend continuing to stay defensive in the approach. The previous session saw IT stocks performing strongly, and we may also see pharma and other defensive pockets like FMCG and consumption make up. While staying light on the positions, a continued cautious outlook 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 milan.vaishnav@equityresearch.asia)