The domestic equity market saw an extension of the pullback on the expected lines on Thursday. Finally, Nifty opens way better than expected as it opened above the 50-DMA level. Derivate contracts and weekly options adjusted the market move during the expiry of May 2020.
After a positive start today, in late morning trade, Nifty tested its high and sideways in a defined trajectory throughout and rest of the session.
The index finally closed near its high point with a gain of 1.88 per cent or 175.15 points. All traders are advised to stick to a stock-specific approach.
Trade Setup: Overall Market Performance
Nifty did not move past 9,500 which is the concentration of maximum call open interest throughout the session. Volatility also declined as volatility index – INDIA VIX fell again by another 4.1 percent or 30.0175. Since the last two sessions, there’s an increase in the Nifty Index by 450 points, which also increases the chances of consolidation at the higher levels.
As the index is now above 50-DMA i.e., 8,986; it will also work as closing basis support. As long as the Index stand above this level, we will see positive bias on Nifty.
On Friday, Nifty can face resistance at 9,525 and 9,565 points, with the support coming lower at 9,410 and 9,365 points.
Technical Analysis
The RSI (Relative Strenght Index) also stood at 57.06 on a daily chart. It is a bearish divergence against price as it did not make a 14-period high.
The daily MACD traded above the signal line hence remained bullish. A rising window occurred on the candles. The gap-up results usually forecast the up-move continuation. However, confirmation is needed through the next trading candle.
Pattern analysts show Nifty has prevented breakdown, at least for some immediate short-term basis. It is being suggested to avoid shorts with every rise and approach the market in a highly selective and stock-specific manner individually. The short momentum is showing signs of upside momentum persistence for some time.
Though, as per the rise if market conditions in the last session cannot rule out the consolidation at current levels. It is being recommended to avoid large positions on either side and to follow the up-moves with a stock-specific approach.
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