Trade Setup: 17,500-level remains key for Nifty50; select sectors to outperform

Nifty50 on Wednesday, opened on a modestly positive note and it kept making gradual highs during the day while trading in a limited range. At one point in time, Nifty50 found itself stable and extending its previous day’s up move. However, in the second half of the day markets saw some serious selling pressure. The sharp selloff not only dragged the markets into the negative territory, but Nifty50 lost nearly 240-odd points from the high point of the day. Following a recovery towards the end, Nifty50 ended with a net loss of 88.30 points (-0.50 per cent).

On Thursday, we enter the expiry day of the monthly derivative series. The strikes of 17500 and 17600 saw a lot of Call writing taking place on Wednesday; the level of 17500 holds maximum Call OI concentration followed by the level of 17600. This shows that the markets may find resistance in this zone on the expiry day. From the broader technical perspective, it would be crucial for Nifty50 to defend its most immediate low of 17216. It would also be immensely important for the headline index to crawl back above the 17450-17500 levels at the earliest. Unless this does not happen, we are again staring at some possibility of prolonged consolidation.

Thursday will see the levels of 17435 and 17500 acting as resistance points. The supports come in at 17310 and 17230.

The Relative Strength Index (RSI) on the daily chart is 36.79; it shows a mild bullish divergence against the price. The daily MACD stays bearish and below the signal line. No major formations were noticed on the charts.

Thursday being the expiry day of the current monthly derivative series, the session is bound to witness rollover centric activities. Apart from this, we also saw banks relatively outperforming the broader markets as well as Nifty50. Bank Nifty may continue with its relative outperformance against the frontline Nifty50 as well as the broader markets. It is also likely that select pockets of PSE stocks, auto, and oil and gas universe also shows relative outperformance and stay resilient. It is recommended that overall exposures must be kept at moderate levels unless Nifty50 moves and stays above the 17500-level.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])