Trade Setup: Nifty prone to profit booking at current level, consolidation overdue

Trade Setup: Nifty prone to profit booking at current level, consolidation overdue

Although the domestic equity market continued to post gains for the sixth day in a row, headline index Nifty showed all signs of some impending consolidation at current levels.

Nifty had a quiet opening on the expected lines. After opening positive, the index soon slipped in the negative territory. Following a recovery and trading flat in late morning trade, the index slipped again to mark the low point of the day in the afternoon. A recovery in the second half of the session took Nifty higher. Finally, the index ended the day with a net gain of 49.35 points or 0.35 per cent.


Wednesday’s session was influenced by rollover centric activities. The next session not only has the weekly options expiry to deal with, but it also has the current December series expiry coming up as well. This will ensure that the session stays dominated with rollovers. The strike of 14,000 continued to saw heavy Call writing and this level also holds the maximum Call OI concentration. Therefore, unless there is a strong push, Nifty will find it difficult to penetrate this level and sustain above this. The maximum Put OI at 13,900 also holds the possibility of keeping the market ranged unless a tactical shift occurs.

Volatility continued to rise as India VIX moved higher by another 1.53 per cent to 21.1100. Thursday’s session is likely to see the levels of 14,025 and 14,065 acting as resistance points, while support will come in at 13,900 and 13,815.

The daily RSI is 72.39; it stays mildly overbought and also continues to show bearish divergence against price. The daily MACD has turned positive, it is bullish and trades above the Signal Line. A Doji candle occurred on the charts. Its occurrence at the high point holds the potential to disrupt the present trend and push the market towards a consolidation. However, it will require confirmation on the next trading day.

Given the present technical setup, analysis for the next trading day remains on existing lines. Not only will the market stay influenced with rollovers, but it is also likely to exhibit tentative behavior on current and higher levels. Just like the previous session, the market stays prone to profit taking at current levels. Any such activity will push the market in to some consolidation, which again remains overdue.

We recommend continuing to stay highly stock specific. The upsides, if any, may be used to protect profits. Purchases should be kept moderate with a continued cautious view on the market.

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

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