Saturday, November 28

Trade Setup: Sustainable up moves unlikely as long as Nifty stays below 12,000

In volatile trading last Friday, the domestic equity market suffered a minor breach of the broad consolidation zone formed over the past two weeks.
Nifty saw itself opening on a mildly stronger note and on the positive lines. However, after the better-than-expected opening, the index formed its high point in early minutes of the trade. After that, it started to gradually pare gains. At one point, it also slipped deep in the negative as it came off nearly 200 points from the high of the day. However, the second half of the session saw some substantial recovery and Nifty ended the day with a net loss of just 28.40 points or 0.24 per cent.

Two technically important things happened on Friday. Nifty suffered a breach from the broad trading zone that it had formed following a wide-ranging session on October 15th. The index also tested the 50-DMA and bounced back from that level. The 50-DMA, which currently stands at 11,548, would be an important near-term support to watch out for.

Volatility increased as India VIX moved higher by 3.04 per cent to 24.7525. Monday’s session is likely to see the levels of 11,690 and 11,735 acting as resistance points, while support would come in at 11,590 and 11,545 levels.

The pattern analysis shows that following the large wide-ranging bar created on October 15th, Nifty stayed within this range for the next ten sessions. However, in the previous trading day, Nifty had violated the support of this trading range, though it managed a pullback to the edge of this range.

While having a look at the F&O data, it appears that Nifty futures have added over 9.83 lakh shares or 9.84 per cent in Open Interest. Though these figures will show some inflated additions as they are just a day after the expiry, but it signifies creation of some short positions in the market as well.

Few minor pullbacks cannot be ruled out. However, it is recommended not chasing these pullbacks as they will simply take Nifty inside the trading range. Sustainable up moves are unlikely as long as Nifty stays below

12,000. Any move that takes Nifty near 12,000 will again make it vulnerable to profit taking bouts at higher levels.
While sticking to defensive methods, a highly cautious and stock-specific approach is advised for the day.

Credit: Stocks-Markets-Economic Times

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