By Sameet Chavan
Markets had a positive start on Monday and without wasting much time, Nifty continued with its streak of achieving new milestones. During the first couple of sessions, Nifty clocked back to back fresh highs beyond 17400; but failed to close beyond it on both the occasions. In the latter half, we saw some hint of profit booking but mighty bulls came back strongly not only to defend key supports but also to lift the benchmark index beyond 17350 comfortably to mark the highest ever weekly close.
The price action in key indices this week was extremely dull as we witnessed one of the thinnest weekly trading ranges for a long time now. Although Nifty looked a bit uncomfortable around 17400 throughout this week, we did not see any major weakness overall. The moment it falls by nearly a percent, the buying tends to happen immediately. As of now, clearly bulls are having a firm grip on the market but as we have been mentioning for a week or so, they would find it a bit difficult now going ahead.
We reiterate our observations for becoming slightly cautious at current levels. They are, 1) we can see Nifty reaching the 200% ‘Fibonacci Retracement’ of the last year’s massive decline from Jan’20 high to March’20 low, 2) Time-wise, Nifty has entered 7th zone as per ‘Fibonacci Time Series’ on the monthly time frame chart.
It may look a bit contradictory to adopt a cautious stance when the market is making new highs almost every day. But these mentioned evidence have proved their efficacy in the past and hence cannot be overlooked. So let’s see how things shape up going ahead. As far as levels are concerned, 17450 – 17500 would now be seen as a sturdy wall; whereas on the flipside, the first sign of weakness would come only after confirming a single day close below the support zone of 17300 – 17250. We advise traders to continue with a stock centric approach by following strict stop losses and booking timely profit is also highly recommended.
As far as F&O activity is concerned, the index ended the week on a strong foot around 17370 but no major change in open interest was seen in indices. FIIs unwound some of their longs in the index futures and their ‘Long Short Ratio’ is above 63 percent. There was no fresh build up in indices this week but we believe the previous longs in Nifty are still intact. In the nearby strikes, 17400 call and 17300 put has highest open interest.
(Sameet Chavan is Chief Analyst – Technical and Derivatives, Angel Broking. Views expressed are the author’s own.)