We have expiry of the current derivative series on Thursday, and the session is expected to be dominated by rollovers. Nifty is placed at a crucial juncture, as it halted its technical pullback at the 50-DMA, which is at 12,130.
The index is also hovering around its important Double Top level at 12,100, which it had breached to achieve a breakout.
Nifty’s price action against the 50-DMA level on a closing basis will continue to remain critical over the coming sessions.
Thursday’s session is likely to see a muted start, with 12,155 and 12,190 levels acting as important resistance. Support may come in at 12,085 and 12,000.
The Relative Strength Index (RSI) on the daily chart stood at 47.71 and was neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. No significant formations were seen on the candles.
As per pattern analysis, Nifty has stayed within the broadening formation. The technical pullback halted at the 50-DMA, which is at 12,130.
All in all, if the market has to avert significant weakness in the near term, it will have to crawl above the 50-DMA, otherwise, we may see some negative bias dominating Dalal Street again.
As per weekly options data, the highest Call open interest (OI), which existed at 12,300, has come down to 12,200, bringing resistance levels lower. On the downside, the highest Put OI stands at 12,000. This suggests that there are fewer chances of Nifty moving past the 12,200 level. On the downside, 12,000 will act as crucial support.
We would again advise traders to avoid aggressive positions and suggest to protect profit at higher levels.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)