Trade Setup: 11,715-11,785 resistance points for Nifty, minor pullback cannot be ruled out

The domestic equity market continued to falter on the expiry day of the monthly derivative series as it extended losses of the previous session to end yet another day in the red.

Nifty had a gap-down opening, but spent the morning session recovering from the opening lows. At one point, the index had recovered all its losses. However, the second half of the session saw the market coming under pressure once again. Following a modest recovery, Nifty ended with a net loss of 58.80 points or 0.50 per cent.

Today's session was dominated by F&O expiry. However, the maximum Put OI stood at 11,600 which prevented the market from slipping below it. Nifty tested the lower edge of the broad trading range and hangs precariously near that level.
Nifty’s behavior against the zone of 11,600-11,630 would be crucial and the index will have to stay above this to prevent any near-term breakdown. Volatility continued to inch higher as India VIX was up by 3.19 per cent to 24.0225.

Friday's session is likely to see the levels of 11,715 and 11,785 acting as resistance points, while support will come in at 11,600 and 11,510.

The Relative Strength Index (RSI) is 49.16; RSI has formed a fresh 14-period low again and also shows a bearish divergence against price. The daily MACD is bearish as it trades below the Signal Line.

Apart from a small white body that emerged, no major formation was noticed on the candles.

The pattern analysis shows that for nine days Nifty has stayed within the large trading range formed on October 15. However, the index is testing the lower range and any breach would result in more incremental downsides.

Given the two days of decline, a minor pullback cannot be ruled out. However, one will have to stay highly vigilant against Nifty’s behaviour around the support zone of 11,600-11,630. It would be imperative for the market to stay above this zone to avoid incremental weakness. We reiterate approaching the market with caution and keep leveraged exposure limited.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)