Trade Setup: Shrinking price band signals sharp moves and higher volatility ahead

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Home fairness markets had a rangebound session on Wednesday, with the benchmark Nifty oscillating in a restricted vary earlier than ending with minor positive factors. Nifty noticed a powerful and optimistic begin, however marked its intraday excessive within the early minutes of the session. After begin, the market got here off the excessive level and traded inside a capped vary till late afternoon.

The market made an try to check its opening highs, however revenue reserving within the final hour of commerce dragged the index decrease. Nifty oscillated in a restricted vary all through the day, however by no means slipped into the destructive territory. The headline index lastly ended with a minor achieve of 23.05 factors ,or 0.20 per cent.

The 50-pack confronted resistance exactly within the turbulent zone between 11,430 and 11,500 ranges, which is the world created by the formation of a niche when the market began its major decline. This zone will pose stiff resistance to Nifty within the close to time period.

The weekly index choices expire on Thursday and F&O knowledge confirmed most Name Open Curiosity (OI) at 11,500 stage and most Put OI at 11,300. Nifty noticed excessive Put writing at 11,400 stage within the earlier session. Nifty’s behaviour in opposition to this stage will probably be vital. Volatility continued to say no, with INDIA VIX coming off 2.69 per cent to 19.8800.

On Thursday, the 11,450 and 11,500 ranges will act as key resistance for Nifty, whereas helps will are available at 11,345 and 11,200 ranges.

The Relative Energy Index, or RSI, on the day by day chart stood at 65.60 stage. It has proven a bearish divergence in opposition to worth. The RSI didn’t mark a brand new 14-period excessive together with Nifty.

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The day by day MACD stays bearish and doesn’t present any divergence in opposition to worth. No different vital formation was noticed on the candles.

Whereas staying within the Rising Channel, Nifty has flirted with the turbulent space created by the hole that occurred when the 50-pack began its decline. This space between 11,430 and 11,500 ranges will probably be extraordinarily essential to be careful, as this hole must be crammed in for any up-move to materialise.

All and all, the 11,430-11,500 zone will probably be a not-trade zone for Nifty. A weak greenback helps the market to take care of its momentum. As liquidity chases the momentum, we advise traders to not aggressively brief the market. On the identical time, the upside momentum ought to be chased rigorously with strict trailing cease losses. The bands are contracting and that is pointing to sharp strikes and elevated volatility within the coming days.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founding father of Gemstone Fairness Analysis & Advisory Providers, Vadodara. He may be reached at [email protected])

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