Trade Setup: Market stalls, but shows internal strength at the same time


The Indian equity market put its internal strength on display yet again on Wednesday as it consolidated and ended one more time on a flat note. The market saw a quiet opening on the expected lines and traded flat in a narrow range in the first half of the session. Until the afternoon, Nifty stayed range-bound, and showed no directional bias. A sudden wave of profit-taking gripped the market, as the index lost ground rapidly. However, in the last hour and half, Nifty recovered in an equally remarkable way and recouped all the losses.

The headline index rebounded over 120 points from its low point and ended with a negligible loss of 8.60 points (-0.05 per cent).

Thursday’s session will not only see the expiry of weekly options, it will also be the last trading day of the week, as Friday will be a trading holiday for Ganesh Chaturthi.

Weekly options data showed strike price of 17,300 saw the addition of maximum Put open interest a d this level also holds the highest Put OI accumulation. This indicates that the 17,300 level is expected to act as a potential support if the consolidation continues.

Volatility increased a bit; India VIX edged higher by 3.26 per cent to 14.4100 level. The Relative Strength Index (RSI) on the daily chart stood at 81.58; it remains in the overbought territory. The RSI also remains neutral as it does not show any divergence against the price.

The daily MACD is bullish and stays above the Signal Line. PPO remains positive.

A Hanging Man emerged on the candles. Since it has occurred following a uptrend and near the high levels, it has the potential to make the market take some breather and see some consolidation. However, any such formation will require a confirmation on the next bar.

Pattern analysis showed Nifty staged a very strong breakout above the 15,900-15,950 zone. It has kept inching higher while taking intermittent breathers. In the process, it has created base points at each higher level. The most recent base point remains near the 17,200 level, and this makes it an immediate support point for the near term.

All in all, we expect the market to remain range-bound on the expiry day of the weekly options series; this also happens to be the last trading day of this truncated week. We recommend avoiding shorts as there are no definite signs of weakness on the charts. In fact, rebounding from lower levels each time there is some short-lived

correction shows the internal strength of the market. However, in the same breadth, we would advise avoiding aggressive purchases unless Nifty moves past the 17,500 level. Continue stock-specific approach and stay alert of any profit-taking wave at higher levels.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of and and is based at Vadodara. He can be reached at


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