Trade Setup: Nifty prone to bouts of profit taking above 15K; stay highly stock specific

Much on anticipated lines, the overnight handover of the trade setup on Dalal Street was much more bullish as the bond market stayed steady and that saw the yields cooling off a bit.

Following a strong global trade setup, headline equity index Nifty had a positive opening but it was not as strong as expected. The index pared its opening gain as the day progressed. Nifty continued to trade with a positive bias but remained very much within a defined range. However, in the final hour of the trade, the market witnessed a sharp move on the upside which took the index to its fresh intraday highs. Nifty ended with a net gain of 157.55 points or 1.07 per cent.

From a technical perspective, subsequent to the formation of the lifetime high point of 15,431, Nifty has also formed a lower high at 15,176. As we head towards the penultimate day of the weekly options expiry, the maximum Call OI stood steadfastly at 15,000 level. The Options figures read along with pattern analysis makes the zone of 15,000-15,200 a very stiff resistance zone for the market in the near term. Before this, Nifty also has a short-term 20-DMA at 14,994 to navigate. This also corroborates with the reading of maximum Call OI at 15,000 for the immediate weekly options expiry.


Wednesday's session will see the levels of 14,965 and 15,030 acting as immediate resistance points, while support will come in at 14,860 and 14,775 levels.

The Relative Strength Index (RSI) on the daily chart was neutral at 53.47 and did not show any divergence against price. The daily MACD was bearish and stayed below its Signal Line. Apart from a small white candle that occurred on the charts, no other significant formation was noticed.

Among other things, the market saw certain defensive pockets performing strongly despite range bound volatile moves in the market. FMCG and consumption stocks saw a strong outperformance along with IT stocks. While they showed strong relative outperformance, it also indicated a tinge of caution among market participants.

We recommend limiting purchases to only certain defensive pockets. While dealing with the rest of the stock universe, it would be prudent to stay highly stock specific. Also, as long as Nifty remains above the 15,000-15,200 zone, it will continue to stay prone to profit taking bouts. This makes it necessary to keep protecting profits at
each 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)