Nifty has formed “Doji” pattern indicating continuation of downtrend
Nifty surged to a new 52 week high of 5,487.15 in the current week. After marking low of 5,349.20 on very first day of current week it managed to mark high of 5,487.15 on Thursday, finally closed at 5,439.25 with a gain of 1.31% on w-o-w basis. From last three trading session, Nifty is trading in narrow range and moving in between 40 points. On upside Nifty is constantly facing stiff resistance at 5,480 while on downside it has mild support at 7 Day EWMA (5,435). On upside if level of 5,480 is broken again then we could see rally upto mark of 5,540-60, on the other side if level of 5,438 is breaches decisively then Nifty could retrace upto 5,340 mark. On Daily Chart it has formed a “Doji” candlestick pattern on last day of current week which is signalling continuation of existing downtrend. Technical indicators are also suggesting continuation of downtrend. Stochastic is currently hovering in deep overbought zone, on the brink of entering into neutral territory indicating profit booking. RSI is trading in neutral territory at 60, on the verge of showing negative crossover indicating correction. MACD is trading in positive zone showing negative divergence and moving towards negative zone also confirming correction. Nifty has next immediate support at 5,435 (7 Day EWMA) while resistance at 5,480. Today Nifty has just managed to close above 7 Day EWMA. Any decisive breakout below 5,435 could lead it upto 21 Day EWMA (5,396) mark, where it may found mild support and finally upto its strong support of 51 Day EWMA (5,314). Current domestic market scenario suggesting limited upside potential, upside cap seems at 5,500-5,560.Forthcoming IIP and Inflation numbers will remain crucial for deciding the short term movement of market. Any further slump in IIP numbers could lead to profit booking in stocks and indices.
The Put-Call ratio of open interest increased during the week from 0.96 to 0.94 levels. The options concentration has shifted to the 5,300-5,400 strike put option and 5,500-5,600 strike call option.
The Volatility Index (VIX) remained low during the week and closed at 17.37%. Market participants should be watchful at current levels as any up move in volatility may trigger more downsides in the markets. Volatility has a strong inverse correlation with markets.
FIIs were net buyer in index futures to the tune of Rs 171.94 crore indicating market is in uptrend and in the options index FII were net buyer of 6827 crore with lower PCR is indicating the same.
The overall mood is cautious with upward bias 5,520 to 5,550 levels for the Nifty continue to be an immediate resistance. Further. Significant short accumulation witnessed in OTM 5,600 strike call and 5,300 strike put & lower volatility is indicating a range bound market. Overall, the index is expected to remain in a broad range and settle around 5,300-5,550 levels. The market will continue to take cues from global markets; fund flows and risk appetite.trader can short 5,600 strikes Call and short 5,300 strikes put of Nifty.
RECOMMENDATIONS:
Sesa Goa (Sell); CMP Rs. 364.35; Target 340; Stop Loss 374; Support-Resistance 338/375.
Allahabad Bank (Sell); CMP Rs. 201.90; Target 188; Stop Loss 207; Support-Resistance 188/207
