Trade setup: Nifty up move appears stalled; protect profit at higher levels

In yet another day of consolidation, the Indian equity markets failed to take any decisive directional bias and ended the day on a flat note. The markets opened on a positive note and marked its intraday high point in the early seconds of the day. However, after that, the Nifty stayed in a falling trajectory and gradually kept paring gains throughout the day.

By late afternoon, the index slipped in the negative territory. Following a pullback in the final hour of the trade, the benchmark index ended flat, while posting a nominal gain of 10.75 points or 0.07 per cent.

We enter the penultimate day of derivatives expiry for the current month. This and the routine weekly or monthly expiry of the options will also continue to affect the trend. Markets will continue to stay affected by the rollover centric activities.

Looking at the options data, it is seen that 15,300 continued adding high Call Open Interest. This has ensured that the highest Call OI that existed before at 15,500 has shifted to 15,300 levels. Unless a tactical shift occurs, this point will act as an immediate short-term resistance for the Nifty. Volatility continued to slide. India VIX came off by 1.50 per cent to 18.8425, which remains one of the lowest levels of the recent past.

The NIFTY PCR across all expiries is 1.22. Wednesday is likely to see the levels of 15,265 and 15,330 acting as resistance points. The supports come in at 15,110 and 15,060 levels.

The Relative Strength Index (RSI) on the daily chart is 61.07; it remains neutral and does not show any divergence against the price. The daily MACD is bullish and remains above its signal line. Apart from a black body that emerged, no other important formations were noticed on the candles.

The pattern analysis shows that Nifty has attempted a breakout from the falling channel, and after that it suffered a classical throwback, which took the index back to its breakout levels. Though the index has attempted to resume its up move, it has now traded indecisively and appears stalled midway.

All and all, so long as the index continues to keep its head above the 15,000 levels, the bullish undercurrents will persist. That being said, the prolonged period of low volatility continues to remain a concern for the immediate short term. Long periods of low VIX, which is because of low volatility, often reflects complacency of the market participants. Such periods are often followed by high periods of volatility.

Overall, the rollovers may continue to affect the trend over the next two days. However, unless the Nifty is above 15,300, it will struggle to take any clear directional bias. There are possibilities that the Nifty has again formed a consolidation zone between 15,000-15,300 levels. Only when it comes out of this zone will the index make a sustainable directional move. While keeping the analysis on the similar lines, we recommend continuing to follow and chase the momentum carefully. While staying selective in purchases, profits too should be guarded vigilantly at higher levels.

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