Trade Setup: A breakout above 17150-17200 levels crucial for Nifty50’s further up move

The Indian equity markets got a very shaky start to the day as they opened lower on Monday, but eventually spent the rest of the session recovering and ending the day with gains. The markets saw a gap-down start, Nifty50 formed its low point of the day in the early minutes of the session. By afternoon, Nifty50 was able to recover all the opening losses and traded near its previous closing point. The markets grew stronger as the day progressed and piled up incremental gains. The index recovered over 250 points from the low point of the day and maintained them as well. The headline index ended the day with a net gain of 82.50 points (+0.49 per cent).

As we move ahead in the last trading week of the year and also the expiry week of the current month derivative series, the weekly options data show underlying buoyancy in the markets. On Monday, the level of 17000 saw heavy Put writing. As of now, this level has the highest PUT OI accumulation. Going by this data, this level of 17000 is likely to act as immediate support for the markets. Hence, as long as the index stays above this point, there are higher chances of the markets extending their up move going ahead into the last trading days of the year.

Tuesday is likely to see a quiet start to the day; the levels of 17150 and 17225 will act as immediate resistance points. The supports come in at 17000 and 16945 levels.

The Relative Strength Index (RSI) on the daily chart is at 45.92; it has marked a new 14-period high. It shows a bullish divergence against the price. The daily MACD has shown a positive crossover; it is now bullish and trades above the signal line.

The most immediate resistance zone continues to remain in place in the 17150-17200 levels. This is in the form of the short-term 20-DMA which presently stands at 17149 and a pattern resistance in the form of trendline which currently falls near the 17200 level.
So, given the present pattern analysis, despite the underlying strength, Nifty50 will have to move past this 17150-17200 zones convincingly for any meaningful extension of the up move.

The previous trading session saw preference towards traditionally defensive stocks like pharma and IT along with select consumption stocks. This is proof of defensive approach; this is likely to continue for some time over the coming days. It is recommended to continue staying defensive and keep fresh purchases limited to defensive and low beta stocks. While avoiding shorts, profits too should be guarded at higher levels until Nifty50 moves past 17150-17200 levels over the coming days.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)