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Nifty (7830.60, +34.85, +0.45%)

The index has posted another new high in the last session at 7835.65. The uptrend continues at a steady pace. However, we have seen some significant technical events in the Nifty yesterday. While posting 8th straight day of gain, the 14-RSI oscillator has moved up beyond 65 is currently at 67.21. One thing must be mentioned here as an observation—the 14-RSI oscillator on a daily chart would not normally climb back beyond the 65-mark if it is not a bull market just as it did not go below the 35-mark either. This is true in a bull market and the conditions have been fulfilled duly this time. The number of days elapsed in an upswing is generally greater. This time the fall was only for 5 trading days while the current uptrend is already 8 session old. Hence, we would like to reiterate that we are in a bull market and nothing would damage the sentiment for the bullish sentiment so long as 7680 is not taken out in the day’s session.

Yesterday’s session saw a curious thing in the Nifty options activity around the mid-day there had been over 1.2 million fresh calls for the 7800-strike, in the July Nifty series, added to the open interest (OI) tally while for the same strike over 300000 put options were covered. This situation of the bulls temporarily taking back seat and bears becoming aggressive led to large fresh short build-up led to the foundation of late surge in the Nifty from 7784 to 7835, much of which was the result of late short squeeze. This was done perhaps with an intention to nail thought in the bears’ minds that shorting is a dangerous game in this market.

  • Most critical levels for the day: between 7793 and 7756.

  • Strong support: 7756 – 7680

  • Major support: 7680 – 7641

  • Strong resistance: 7847 – 7889

  • Major resistance: 7973 – 8010


Bank Nifty (15534.35, +71.35, +0.46%)

Even the Bank Nifty managed to post nearly half a per cent gain. If you do a recent swing analysis, you find that this sector index has a larger upswing that is still one compared to the preceding downswing: it fell from 15592.80 on July 07 to 14338.65 on July 14 recording 1254.15 points in 7 calendar days while the upswing has lasted for 10 days till now and it has shown a gain of 1288.25 points. Thus, in terms of both price and time this current upswing is larger. What is more significant here is its being larger on the time scale since it is far easier to generate one day spikes and skew a swing in price terms but holding your fort in terms of time takes both more resolve and resource, which in this case tilt the scale in favor of the bulls.

The Bank Nifty also saw quite a bit of short covering in its 15500 and 15200-strike calls while it saw put writing on all strikes starting from 15200 through 15500 yesterday. Thus, the bulls are far more active even here despite banks showing far less strength compared to IT and other sectors. We reaffirm our belief that even here there would be a breakout on the higher side and the Bank Nifty might well be headed towards the 16000-mark sooner than later.

  • Most critical levels for the day: 15535 – 15475, its immediate support as well

  • Strong support: 15415 – 15385

  • Major support: 15263 – 15164

  • Strong resistance: 15605 – 15675

  • Major resistance: 15933 - 16124

 




Note (1): Either on the long side or on the short side if at any moment a counter is not moving beyond an initial or interim target to the final target book profits. Once initial target is crossed, you can use that as your trailing stop-loss level.



Rajat K. Bose
Notes (2): (please read).
* All prices relate to the NSE, unless otherwise mentioned.
* Calls are based on the previous trading day's price activity.
* The call is valid for the next trading session only unless otherwise mentioned.
*

Stop-loss levels are given so that there is a level below/above, which the market will tell us that the call has gone wrong. Stop-loss is an essential risk control mechanism; it should always be there.

*

Book, at least, part profits when the prices reach their targets; if you continue to hold on to positions then use trailing stops to lock in your profits.

*

Don't chase a stock, if you are unable to buy a stock because it hits circuit levels on successive days, don't buy that.

* The analyst and his clients may or may not have positions in the securities mentioned above.
Trading involves considerable risk. Trade at your own risk to the extent you are comfortable. The analyst shall not be responsible for any losses incurred for acting on these recommendations.
Rajat K Bose
 

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