Trade Setup: Time for some consolidation; stop losses are must now

The domestic equity market witnessed yet another surge and moved past the key resistance level at 17,200 before ending above that. Nifty saw a quiet start to the day and stayed in the positive territory throughout the day. While forming lows at opening levels, the index never slipped inside the negative zone. The market saw a steady linear rise for the entire session and showed no sign of volatility. The headline index ended on a strong note, posting gains of 157.90 points, or 0.92 per cent.

The expiry of weekly options happened without much volatility. In fact, INDIA VIX rose just 0.39 per cent to 14.2400. Nifty also went past the 17,200 level; this was the point that had accumulated maximum Call open interest throughout the week. This depicts the inherent strength of the market. With just one day of a mild corrective move, markets have piled up strong gains over the past days. Despite the strength that is evident, some consolidation at higher levels cannot be ruled out now.

Any rangebound consolidation that may happen now will, in fact, be healthy for the current bull run. In Friday’s session, Nifty is likely to see the 17,265 and 17,330 levels act as key resistance points, while supports will come in at 17,145 and 17,070 levels.

The Relative Strength Index, or RSI, on the daily chart stood at 81.27; it remains in the overbought territory. The RSI also shows a mild bearish divergence against the price. The daily MACD remains bullish and trades above the Signal Line.

A strong White Body emerged on the candles. This reflects directional consensus among the market participants throughout the session. Overall, the market is giving enough signals that point towards Nifty inching higher. However, given the quantum of the rise that it has seen over the past couple of days, a rangebound consolidation should not come as a surprise to anyone.

In fact, this is the time to get extremely vigilant and continue strict trailing stop loss levels to protect profits. While one should remain stock-specific, a cautiously positive approach is advised for the day

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of and and is based at Vadodara. He can be reached at

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