Technical Report on Nifty50 - December 6, 2023: Positive Momentum with Cautionary Signals

Market Overview:

The Nifty50 has displayed a robust performance, recording consistent gap-up openings and forming higher highs and higher lows for six consecutive days. The bullish sentiment is further supported by a rally in BSE Sensex, which surged 431 points to 69,296 on December 5. Despite some profit-taking, the Nifty50 climbed 168 points to 20,855, forming a bullish candlestick pattern with a long lower shadow, indicating buying interest at lower levels.

Key Technical Indicators:

?RSI (Relative Strength Index): The RSI, currently at 83, has reached overbought levels on the daily chart. However, it maintains an uptrend on daily, weekly, and monthly charts, suggesting persistent positive momentum.

Moving Averages: The prevailing trend remains positive, supported by critical moving averages.

Expert Views:

Rupak De (Senior Technical Analyst, LKP Securities):

Positive trend supported by critical moving average.

RSI's bullish crossover signals positive momentum.

Resistance at 21,000; support at 20,700.

Jatin Gedia (Technical Research Analyst, Sharekhan by BNP Paribas):

Hourly momentum indicator shows a negative crossover, indicating a potential loss of upside momentum. Advocates riding the uptrend with a trailing stop-loss mechanism.

Resistance at 21,000 – 21,060; support at 20,720 – 20,700.

India VIX and Market Breadth:

India VIX: Climbed for another session, closing 3.57% higher at 13.46, the highest level in more than eight months.

Market Breadth: Broader markets did not align with benchmarks, with the Nifty Midcap 100 and Smallcap 100 indices up by 0.5% and 0.1%, respectively, indicating caution.

Options Data:

Call OI (Open Interest): 21,000 strikes hold the maximum Call OI (1.1 crore contracts), acting as a key resistance. 21,500 and 20,900 strikes follow.

Call Writing: Significant writing at 21,000, 21,500, and 21,300 strikes.

Call Unwinding: Maximum unwinding at 20,700, followed by 20,600 and 20,500 strikes.

Put OI: 20,700 strikes have the maximum OI (81.24 lakh contracts), serving as a key support area. 20,000 and 20,500 strikes follow.

Put Writing: Meaningful writing at 20,800, 20,700, and 20,100 strikes.

Put Unwinding: Maximum unwinding at 19,900, followed by 19,600 and 19,400 strikes.

Put Call Ratio (PCR):

The Nifty PCR dropped slightly to 1.37 on December 5, indicating a decrease in bearish sentiment but remaining above 1, signifying caution.

Conclusion:

The Nifty50 exhibits a positive trend, supported by technical indicators and expert opinions. However, caution is advised due to overbought RSI levels, negative crossovers in hourly indicators, and cautionary signals in market breadth. Traders are advised to monitor key support and resistance levels (20,700-21,000) and consider risk management strategies in the current market environment.

Recommendation:

Considering the positive momentum in the Nifty50, traders may continue to ride the uptrend but exercise caution due to overbought conditions and potential loss of upside momentum signalled by technical indicators. Monitoring key support at 20,700 and resistance at 21,000 is crucial. Risk management strategies, such as trailing stop-loss, are advisable to navigate market uncertainties.

Keywords Used in the Report:

Positive Momentum: Persistent uptrend supported by critical moving averages.

Caution: Overbought RSI, negative crossovers in hourly indicators, and cautious market breadth.

Support and Resistance: Key levels at 20,700 (support) and 21,000 (resistance).

Risk Management: Consideration of risk through strategies like trailing stop-loss.

Technical Indicators: RSI, moving averages, and candlestick patterns.

Options Data: Call and Put OI, writing, and unwinding.

India VIX: Indicator of expected volatility.

Market Breadth: Performance of broader markets.

Disclaimer:

This recommendation is for informational purposes only and should not be considered as financial advice. Trading in the financial markets involves risk, and individuals should conduct their research and seek professional advice before making any investment decisions. The author and platform are not responsible for any financial losses incurred based on the information provided. Past performance is not indicative of future results. Trading involves the risk of substantial loss and is not suitable for every investor.

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