Trade Setup: Indian Investors Wait for Some Consolidation Before Buying

In a session marked by high volatility and wide trading range, Indian stock on Thursday fluctuated on both sides and finally ended in the negative for the fourth day in a row.

The market witnessed a sharply lower opening amid weak global setup.

After opening gap down, NSE Nifty attempted to recover its losses.

By late afternoon, the index rebounded over 600 points from its low point, however, by close, the index pared its gains and ended with a net loss of 205.35 points or 2.42 per cent at 8,263.45.

Thursday’s rebound was fuelled by a massive short covering-led rally.

The weekly options expiry, too, played the dominant role in the trade.The volatility surged, as India VIX spiked 12.89 per cent to 72.20, and trades near lifetime high levels.

Short covering-led rallies can remain deceptive.

Even if the market pulls back a little, it would be crucial to see if there is some buying from lower levels.

Friday’s session is likely to see a quiet start to the trade.

However, the upsides are expected to remain limited even if there is a technical pullback.

The 8,350 and 8,575 levels will act as strong resistance points and supports will come in at 8,010 and 7,800.74717874

The Relative Strength Index (RSI) on the daily chart was at 14.28 and stayed neutral, showing no divergence against the price.

The RSI remained in oversold territory.

The daily MACD remained deeply bearish, as it traded far below its signal line.

As per pattern analysis, Nifty has continued its unabated downside despite staying in oversold territory.

Just like strong bull markets remain overbought for some time, a market with a strong downtrend continues to stay oversold.

The analysis for Friday remains on the similar lines.

The market is on its way to log one of the biggest weekly losses if no meaningful technical pullback occurs.

Also, Indian equities will continue to remain uniformly affected by the global trade setup, which continues to remain very fragile.

We strongly recommend staying away from making any large purchases and wait until some consolidation occurs, which may point towards some stability in the market.

Until this happens, it would be best to avoid placing any major directional bets.Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara.

Original Source: economictimes.indiatimes.com

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