Nifty after hitting a lifetime high of 12103.05 on 3rd June 2019 witnessed profit booking and declined towards 10782 levels which were the low made on 5th August 2019. Thus a total fall of 1321 levels was seen in the last two months. However, it took support around its rising support trend line on the weekly chart and is showing early sign of bottoming out on a short term basis.  The trend line is connected to the low of 6825, 8185, 10004 and 10782 levels which was made in 2016, 2018 and 2019 respectively. So this is the correct time for the bulls to enter the market for a short term bounce towards 11300 then 11450 levels.

The index has taken support at its 61.8% retracement of the entire up leg from 10000 to 12103 on a weekly scale. Index even after opening gap down for most of the sessions in the month of August buying interest emerged around the support area indicating strength in the index. However, the medium-term trend is still in pressure as it has been making lower highs- lower lows on a weekly chart for the last five weeks. Thus, a fall below the 10750-10800 may trigger the bears and selling pressure may intensify towards 10590 then 10333 while on the upside immediate resistance is at 11300 then 11450 levels.

The derivatives data indicates that the base has shifted higher from 10800 to 11000 put strike which now holds the maximum open interest and it will act as meaningful support on a short term basis. On the call side, we do not have any concrete evidence as the open interest is equally divided amongst the various out the money strikes where 11500 holds the maximum open interest.

FII’s has been on a selling spree and the profit booking has only intensified since the start of the month. They have sold around approximately 10000 crores in the August month while on the flip side DII’s are continuously buying and have bought around 8300 crores in the August month.

Author: Ayushi Bagri, AnandRathi Equity Research, 12th August 2019


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