Trade Setup: Crucial for Nifty to cross 15K convincingly; remain defensive

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Trade Setup: Crucial for Nifty to cross 15K convincingly; remain defensive


On a day that was wide-ranging and influenced with the weekly options expiry, headline equity index Nifty ended the day with a modest gain.

The market had a better-than-expected opening today. Following a positive start, Nifty traded within a defined range; however, it got stronger as the day progressed. From a kissing distance of 15,000 points, the index saw a strong profit taking bout which saw it coming off over 150 points from its high point. Following some recovery in the end, the index ended the day with a modest gain of 54.75 points or 0.37 per cent.

ET CONTRIBUTORS

The session was typically influenced with the weekly options expiry. The level of 15,000 had maximum Call OI since beginning and 14,900 also saw heavy Call writing which prevented the index from sustaining above that level. The level of 14,800-14,850 strikes saw heavy Put writing as well which helped the index settle above this point. From a technical perspective, Nifty managed to cling on just a notch above its 50-DMA at 14,804. Managing to stay above this point on a closing basis will be very crucial for the market going ahead from here.

Though the trading range was wider-than-expected, volatility increased very marginally. India VIX rose by 0.32 per cent to 20.3125. Friday’s session is likely to see the levels of 14,930 and 15,000 acting as resistance points, while support will come in at 14,800 and 14,765 levels.

The Relative Strength Index (RSI) on the daily chart was 52.64; it showed a mild bearish divergence against price. Though the price was at 14-period high, the RSI did mark a new high. The daily MACD was bullish and remained above its Signal Line. A Doji emerged on the candles. Its occurrence near the breakout point cum resistance area

indicates high level of lack of consensus and indecisive behavior of market participants.

The F&O data suggests that the index saw some short-covering from the end of day perspective as it rose with the decline in net Open Interest. Having said this, to breakout form the falling channel, the index will have to move past 15,000 convincingly. Until this happens, we will see the market staying vulnerable to profit taking bouts from higher levels. We recommend continuing to adopt a defensive approach and also vigilantly guard profits at higher levels without getting carried away with any up moves as long as Nifty is below 15,000.

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



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