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Trade setup: F&O expiry, low trading volume likely to keep Nifty depressed


In a very dull and quiet trading session, the Indian equity market slipped into corrective mode on Tuesday, as it ended in the negative territory. The market saw a quiet start to trade and Nifty traded in the positive zone in the initial minutes of the session.

The index soon slipped into the red and spent the major part of the session trading in the negative territory, staying within a minimal and capped range. It was in the last hour-and-a-half of trade that Nifty 0witnessed selling pressure with increased intensity. The headline index ended the day with a net loss of 48.20 points, or -0.39 per cent.

We have the expiry of the current derivative series coming up on Thursday. Also, the market shall open after a day of a trading holiday on account of Christmas. We expect Nifty to continue to show a corrective bias even if it sees intermittent short covering at lower levels. The 12,300 level has now become a temporary top for the market for the immediate short term.

Nifty snip 6

Trading volumes are expected to remain lower than usual because of the holiday season. On Thursday, the market is again likely to see a tepid start to the session. Even if some initial stability or minor up-moves are seen, there are higher chances of the market exhibiting a corrective bias. The 12,255 and 12,290 levels will act as immediate resistance for Nifty, while supports will come in lower at 12,185 and 12,150 levels.

The Relative Strength Index (RSI) on the daily chart stands at 62.32; it remains neutral and has not shown any divergence against the price over the 14-day period. The daily MACD remains bullish and trades above its signal line. A black body emerged on the candles. Though it does not represent any specific pattern, the size of the body is relatively larger than the previous couple of candles. Also, this candle appeared near the 12,300 level and this highlights the importance of that level as a probable point of resistance. Pattern analysis shows Nifty is getting exhausted after breaking out of the double top formed at the 12,103 level. Though the breakout remains entirely in place, the index is looking to take some breather as loss of momentum is getting evident on the charts.

We continue to reiterate a cautious view on the market. There are no major bearish formations on the charts, but lack of volumes due to the holiday season and some loss of momentum post the breakout are likely to keep up-moves in check. We recommend avoiding large positions during these days and protect profits at higher levels. A cautious view 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.asiaMilan Vaishnav, CMT, MSTA.





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