Trade setup: Rollover-centric activities to dominate Nifty; may witness profit taking at higher levels

On expected lines, the Indian equity markets put up a strong show and posted yet another day of gains. The markets saw a stable opening in line with the global trade setup. After opening on a positive note, the Nifty slipped briefly in the negative twice in the morning session. However, each time it was able to crawl back inside the positive territory.

The market pulled itself back near its high point again by afternoon. For the rest of the day, the markets were able to sustain that pullback and showed no intention to correct. The benchmark index ended with net gains of 93 points or 0.61 per cent.

Thursday not only has regular weekly options expiry coming up, but it also has a monthly derivative expiry lined up. The session will continue to remain dominated with rollover-centric activities. The previous session saw sustained Put writing at 15,200, 15,250 and 15,300 levels. This indicates that the markets have tried hard to raise the support higher. While the highest Put OI stands at 15,200, maximum Call OI concentration was seen at 15,500 levels. This defines 15,200-15,300 as a broad range for the Nifty for expiry day.

On expected lines, the volatility spiked. India VIX rose 10.77 per cent to 20.8725. Thursday is likely to see the levels of 15,375 and 15,410 as resistance points; supports will come in at 15,250 and 15,180 levels.

The Relative Strength Index (RSI) is 63.19. It stays neutral and does not show any divergence against the price. The daily MACD is bullish and remains above the signal line. A white body emerged on the candles. Apart from this, no other significant formation was seen on the chart.

The pattern analysis shows that the Nifty broke out from a falling channel, suffered a throwback, and resumed its up move. Presently, the breakout remains very much in force and valid. This has increased the possibility of Nifty testing its previous highs.

Broadly speaking, the undercurrent continues to remain buoyant. The Nifty has successfully achieved the breakout, and in the process, it has raised its supports higher in the 15,000-15,200 zones. So long as the index remains above this zone, the markets will continue to maintain inherent buoyancy. Volatility has spiked by over 10 per cent in the previous session on expected lines. This is something traders will need to vigilantly guard against as it may infuse some profit taking bouts at higher levels. While continuing to chase the momentum carefully, a cautiously positive outlook is advised for the day.

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