Trade Setup for July 7: Nifty trajectory hinges on road ahead for India-US trade deal as deadline nears

Following two sessions of decline, the benchmark Nifty 50 index staged a strong comeback on Friday, sharply recovering from its intraday low to close near the day's high.

In the first half of the session, the index continued its corrective phase, hitting an intraday low of 25,331. However, a sharp recovery of 133 points in the last half of trade helped the Nifty close with modest gains.

The index ended the day up 56 points at 25,461. On a weekly basis, though, the Nifty declined 0.69%.

Bajaj Finance, Dr. Reddy's, and Infosys were among the top gainers on the Nifty, leading the recovery. On the other hand, Trent, Tata Steel, and Eicher Motors were among the major laggards, facing selling pressure.

After a sharp fall in the morning, both the Nifty Midcap and Smallcap indices bounced back strongly in the second half, ending the session broadly flat.

Sector-wise, barring Nifty Auto and Metal, all other sectoral indices closed in the green. Nifty Oil & Gas, Realty, Pharma, and IT saw the most buying interest.

Despite the rebound, both domestic and foreign institutional investors were net sellers in the cash market on Friday.

Looking ahead, market participants will closely watch two key events on July 9, the outcome of the US trade deadline and the release of the Federal Reserve's FOMC minutes, both of which could influence global market sentiment.

Nagaraj Shetti of HDFC Securities said the Nifty has formed a reasonable negative candle on the weekly chart after last week's breakout above the broader range of 24,500–25,200. This places the index at a crucial support zone, based on the principle of polarity, where prior resistance turns into support.

Shetti expects the next upside targets at 25,700 in the coming week and 26,200 over the next two weeks, with immediate support at 25,300.

Rupak De of LKP Securities also identified 25,300 as the key support level. As long as the index holds above it, bullish sentiment is likely to persist. On the upside, the Nifty could move towards 25,800-26,100, with immediate resistance at 25,500. A breakout above that level could accelerate upward momentum.

According to Nandish Shah of HDFC Securities, the index has formed a bullish "Hammer" candlestick pattern on the daily chart after finding support on the upward-sloping trendline connecting recent swing highs. This suggests the recent pullback may be over, and the uptrend could resume.

Shah said Friday's low of 25,331 now acts as strong support, while the 25,600-25,670 zone may offer near-term resistance.

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