Trade Setup: Nifty support seen at 14,900 and 14,820 levels; chase momentum carefully

In the previous note, it was mentioned that the Nifty has attempted a breakout from the falling channel. However, it is headed for a ranged session and some consolidation. On expected lines, Nifty put up a resilient show, continuing to trade in a limited range, though it ended the day on a negative note.

The markets defined the initial weak global trade setup. Instead of opening with a gap down, it opened on a resilient note. It stayed resilient for the most part of the session. However, the last hour and a half of the trade saw the benchmark index giving up over 100-odd points from its high point. Nifty ended with a net loss of 77.95 points or 0.52 per cent.

Thursday has a weekly options expiry lined up. The markets will stay highly dominated with options expiry-influenced trade setup. It is interesting to see that the levels of 15,100 and 15,300 added the same number of Call OI of 1.3 million Nifty. At the same time, these two strikes also hold a similar and maximum Call OI of 4.2 million each followed by 15,200 levels, where the Call OI stands at slightly lower 4.1 million. So, there is an equal amount of resistance at all these three levels. On the lower side, a similar maximum Put OI stands at 14,900 and 14,700 levels. This tells us that the Nifty is likely to take a directional bias on either side tomorrow.

Markets are likely to see a soft start to the day. The levels of 15,100 and 15,190 are likely to act as immediate resistance points. The supports come in at 14,900 and 14,820 levels. The trading range is expected to stay wider than usual.

The Relative Strength Index (RSI) is 58.03; it remains neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line. A Spinning Top occurred on the candles. This is typically a candle with a very little and small real body. It denotes indecisive behavior of the market participants. When it occurs following any up move, it has a potential to temporarily halt the current trend.

All and all, with volatility rising marginally by just 0.40 per cent, India VIX continues to remain at one of its lowest ranges seen in recent times. It would not be a surprise if some increase in volatility is witnessed. Markets again showed preference towards select defensive stocks. On the other hand, economy-facing high beta stocks like autos, financial services, etc., saw some retracement.

We reiterate that the attempt to breakout definitely remains in place, but it is not confirmed unless the high point of 15,150 is taken out convincingly. We reiterate, continuing to chase the momentum carefully. While keeping equal focus on protecting profits as well on the higher side, a highly cautious and selective approach 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