Trade Setup: 14,000-14,200 range crucial for Nifty; avoid high beta stocks

On the second last day before the expiry of the weekly options, the market traded absolutely on the anticipated lines.

Headline index Nifty opened on a quiet note and stayed ranged in the first half the session. The second half of the session saw some sharp profit taking at higher levels. Nifty came off over 200 points from the high that it had marked in the opening minutes of the trade. However, in the last hour-and-a-half of the trade, Nifty recovered bulk of its losses as it rebounded nearly 100 points from the low point of the day. The headline index finally ended the day with a net loss of 53.25 points, or 0.38 per cent.

The strike of 14,200 had a massive 2.3 million quantity of Call writing during the day. Maximum Call OI of over 5 million stood at this point. Unless there is a tactical shift, this level will act as a resistance point in the next session. The coming session will stay influenced with the weekly options expiry. The maximum Call OI stood at 14,000 level. Volatility continued to increase as India VIX surged higher by another 2.61 per cent to 20.9950.

The market will inherit overnight trade setup as it steps into Thursday’s trade. The levels of 14,200 and 14,245 will act as resistance points, while support will come in at 14,060 and 14,000 levels.

The Relative Strength Index (RSI) on the daily chart is 73.51; it stays neutral as it shows no divergence against price. The daily MACD is bullish as it trades above the Signal Line. Apart from a black body that emerged, no other formations were seen on the charts.

All and all, the analysis for the coming session will continue to remain on existing lines. The undercurrent remains buoyant but given the overextend texture of the market, some more ranged consolidation cannot be ruled out.

While the market consolidates within a broad range, there are ample signs of Nifty staying largely buoyant as per the derivates data. However, any consolidation should not come as a surprise because any such activity would be healthy for the market in the long run and would make the current up move healthier.

The coming session would remain influence with rollover activities. The range of 14,000-14,200 would be crucial for the market going ahead from here. We recommend continuing to approach the market cautiously and avoid high beta stocks, while staying put with defensives on a stock-specific basis.

(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)