Trade Setup: Key resistance for Nifty at 15,000 in near term; don’t chase up moves

In a very buoyant trading day, the domestic equity market continued advancing and ended yet another session with gain.

Headline index Nifty opened on a positive note and got stronger as the day progressed. Nifty stayed once again within an upward rising trajectory for most part of the day and showed no intent to correct. Though it did come off in the last hour of the trade from its high point, but that was negligible, and no major retracement was seen. Nifty ended on a strong note gaining 211.50 points or 1.44 per cent.

Thursday’s session is not only the weekly expiry, but also the expiry of the current monthly derivate series. The session is bound to stay influenced with rollovers. Nifty PCR across all expires stood at 1.57, which was strong enough, but not overbought. The level of 15,000 continued to see highest concentration of Call Open Interest and this point will continue acting as strong resistance.

Nifty is up over 800 points from its recent lows; it would not be a surprise if the market sees some consolidation at current levels. Volatility continued to dip as India VIX came off by 2.18 per cent to 22.5800.

Thursday’s session is likely to see a stable start to the day again. The levels of 14,900 and 14,980 are expected to act as resistance points while support would come in at 14,790 and 14,710 levels.

The Relative Strength Index (RSI) on the daily chart stood at 55.95; it marked a new 14-period high which was bullish. The daily MACD was bullish and showed a positive crossover on expected lines. It was above its Signal Line. A rising widow occurred on the charts; though it requires a confirmation on the next trading day, it generally has bullish implication.

The pattern analysis shows that Nifty has move past its 50-DMA as well at 14,798. As long as the index stays above this point, the underlying current will remain relatively strong.

Overall, some consolidation at higher levels cannot be ruled out; the levels of 15,000 continues to remain key resistance point in the immediate short term. 14,800 level showed significant Call unwinding; suggesting that market participants expect the index to stay above this point. However, this remains highly susceptible to change. We reiterate not chasing up moves any more and focus more on protection of profits at higher levels. Using up moves more to book profits than to make any new purchases would be a prudent thing to do. Fresh purchases, if any, should now once again be kept limited to defensive stocks.

(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)