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Trade setup: Nifty may continue to find hurdle in 12,000-12,050 zone

In a session dominated by weekly options expiry, NSE Nifty swung 70 points on either side before ending with a modest gain. The market saw a mild positive opening, but soon slipped into the red. In the second half, the index witnessed short covering from the lower levels and recouped its losses. Finally, Nifty ended with a modest gain of 31.65 points or 0.27% per cent at 11,872.10.

The pullback again came on the back of short covering, as evident from the reduction in open interest along with the rise in the index.

Such behaviour continued to keep the market at lower levels. With every surge coming solely on the back of short covering, we will need to approach all upmoves with caution going ahead unless the zone of 12,000-12,050 is taken out comprehensively.

Friday’s session is likely to see a tepid start, as initially positive moves cannot be ruled out. The index will face resistance at 11,930 and 11,965 levels. Supports may come in at 11,810 and 11,750.

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The RSI on the daily chart stood at 61.05 and stayed neutral, not showing any divergence against the price. The daily MACD was bearish after the negative crossover in the previous session; it trades below its signal line. PPO stayed negative.

A spinning top emerged on the candles, indicating an indecisive session.

As per pattern analysis, Nifty continued to remain in the retracement mode after stalling its rally near the 12,000-12,050 zone. It is expected that the index will continue to find overhead resistance in the said zone and may remain broadly rangebound over the coming sessions.

All in all, there will be mild upmoves with some increase in volatility in the sessions. However, these upmoves should be chased very carefully.

We recommend traders to protect profits at higher levels and avoid aggressive exposures. Nifty is likely to face stiff resistance in the 12,000-12,050 zone.

While avoiding excessive exposure on either side, a cautious approach is advised for the day.

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

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