Trade Setup for October 10: Nifty Bulls aim to breach 25,250 barrier after TCS results

While writing the setup for Thursday’s trade, we told you how Tuesday and Wednesday’s sessions were exact replicas on the Nifty 50 charts. Intraday rallies are sold and dips are bought. Thursday was the reverse of this trend.

Similar to the last two sessions, the Nifty gave equal chances to the bulls and bears. But unlike the last two sessions, the index finished near the day’s high instead of finishing at the day’s low.

It may have been just a small margin, but the Nifty managed to hit a higher high and a higher low on the charts in today’s session. All sectoral indices ended higher on Thursday, led by metals, IT and pharma, with the IT index now gaining 5% in the four trading sessions of the week so far.

IT stocks will continue to remain in focus after the TCS results. Two possibilities emerge after results that beat expectations on most fronts: one being that the stock is in profit given that it has gained in three of the last four trading sessions. The second likelihood is that given the stock is already down and significantly underperforming this year, the recovery from the 52-week lows may simply continue.

In response to the TCS results, US-listed stocks or ADRs of Infosys and Wipro are trading with gains of up to 1% each.

The surge in IT stocks has diverted attention from Nifty Bank, which has remained out of the limelight for much of this week. Although the index made a low on the charts on Thursday, it made a higher low and also managed to hold above the 56,000 mark, which remains bearish for the index. On the upside, the 56,280 – 56,300 area continues to remain a barrier. The Nifty Bank needs to close above 55,589 to also report its fifth weekly gain in the last six weeks.

“The short-term moving averages continue to show strength, with a bullish crossover of the 9-EMA and the 20-EMA over the 50-EMA, confirming the continuation of the short-term uptrend. The RSI has increased slightly to 63, reflecting sustained momentum. A close above 56,300 could open the door for a further move towards 56,550-56,700,” said Om Mehra of SAMCO Securities.

“Support remains in the 55,900-55,800 area. The index remains resilient, and as long as 55,800 maintains this level, the near-term tone will likely remain bullish, with a preference for further declines,” he added.

The Nifty has now gained in five of the last six trading sessions and is also expected to see a weekly advance. The index must close above the 24,894 mark to record its fifth weekly advance in the last six weeks. The first important level to watch on the upside for the Nifty is Tuesday’s high of 25,220. The index continues to find support between the 25,000 and 25,050 levels, and this continues to remain the key level for a potential decline.

“Nifty’s short-term trend continues to be positive. A decisive move above 25,200 levels could take Nifty towards another resistance of 25,450 levels in the coming sessions. Immediate support is placed at 25,000 levels,” said Nagaraj Shetti of HDFC Securities.

Shrikant Chouhan of Kotak Securities believes that the 25,200 – 25,250 zone will continue to be an immediate hurdle for the bulls. A break above this zone could take the index back to its recent highs of 25,450 or even 25,500, he added.