Trade Setup: 14,475-14,500 level crucial for Nifty to maintain buoyancy

After some initial consolidation in the early morning session, the domestic equity market continued its unending up move and went on scale yet another dizzying height by ending the day with a decent gain.

Headline index Nifty saw itself opening on a quiet note on expected lines. The first two hours of the session had the index trading within a range-bound manner as it formed the low point of the day. In late morning, the index crawled into the positive territory. For the remaining part of the day, Nifty kept marking incremental highs as it stayed within a rising trajectory. The index closed with a gain of 78.70 points, or 0.54 per cent.

An important thing to notice during the session was that the net gain in Nifty was contributed mainly by just two stocks - HDFC Bank and Reliance Industries. Another striking thing to observe was the market behavior of heavy Put writing the moment it passed the 14,500 level. This level had the highest Put writing during the day. However, the maximum Put OI stood at 14,200. It is crucial for Nifty to stay above 14,475-14,500 levels to maintain buoyancy. On the other hand, the maximum Call OI shifted further away to 15,000 level.


Nifty is highly overextended and is in for a sharp consolidation at any moment now. The levels of 14,550 and 14,655 will act as resistance points, while support will come in at 14,470 and 14,400 levels.

The Relative Strength Index (RSI) on the daily chart is 80.94; RSI has marked a new 14-period high but continues to stay grossly overbought. The daily MACD is bullish as it stays above the Signal Line. A white body candle emerged on the charts. It confirmed the previous candle’s rising window formation and showed continued trend on the upside.

The market is now highly overextended than ever before, signaling the requirement of a high degree of caution. Importantly, given the strong undercurrent, shorts should be strictly avoided even if the market shows some temporary blip because of probable profit taking at higher levels. Unless there is a specific sign of any topping out of the market, selective purchases may be made while refraining from shorts. However, as often reiterated in our previous notes, new purchases should be kept at very modest levels in selective and defensive stocks. Profits should be protected vigilantly protected at every level.

(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)