Technical Analysis
WHAT LIES AHEAD : NEAR-TERM PICTURE
4 Flash News Investment, Dec 30, 2019 www.DSIJ.in Technicals SPOT NIFTY : Nifty ended the December monthly series with a small gain of 70.50 points or 0.58 per cent. It actually formed a dragonfly doji on a monthly chart, which indicates that the tiredness of the bulls and the bullish momentum is waning. Even the Bank Nifty formed a similar kind of dragonfly doji on monthly charts. Nifty lost 175 points from its lifetime high in 3 trading sessions. Nifty registered the highest fall after December 6. The broader indices like Nifty Midcap-100 and Smallcap-100 indices underperformed when compared to the benchmark indices. The Small-cap index lost 2.24 per cent and the Mid-cap index lost 2.08 per cent in December. The Mid-cap index is oscillating around the 200-DMA, while the Small-cap index is still 4.74 per cent lower than 200-DMA. This divergent broader market move is because of the selective large-cap and liquidity-driven market. The data shows that 60 per cent of the recent FPI inflows went into BFSI sector-specific large-caps. In this less sectoral participation and historical high PE, the investors turned cautious in the last 3 days. The market breadth once again deteriorated. We had suspected this as a non-confident bull rally and the gaps are identified as exhaustion gaps. The project target of 12,300 has been almost met and retracing downwards now. The negative divergence in leading indicators was the main reason for the suspicion on the rally. Now, it is better to have a cautious approach on the long side. The RSI turned down to 55 levels and MACD line is also about to cross under the signal line. Nifty falling below the prior breakout level is the first sign of weakness and failed breakout. It closed below the 8-EMA and took support at 13-EMA. In any case, if the Nifty breaks below the 20-DMA (12,078), the short-term weakness will continue for some more days. Let us wait and watch whether the Nifty is heading to test the consolidation bottom 11,800 once again or not. The intermediate bearish trend is likely to emerge only below the prior swing low of 11,832. Till then, the market may consolidate further. It is time to book profits on the table!
NIFTY DERIVATIVES: Nifty Futures gained just 28 points in December series. It lost 141.25 points or 1.15 per cent since last weekly expiry or in 4 trading sessions. The Nifty opened with a big gap down and filled the gap almost during the final day of the series. But sustained profit booking forced Nifty to close near the opening level. It formed a gravestone doji on Thursday. The rollovers were seen at 57.22 per cent, which is lower than the last month. The open interest rose by 6.92 per cent indicating that the shorts were built up in the market. The maximum open interest was seen at 12,200 call strike for the next week series with 14,94,075 OI. On the put side, the maximum open interest is at 12,000 strikes. The total call open interest is at 70,30,800 and the total put interest is at 62,54,850. For January series, the Open interest-wise Put-Call (PCR) is seen at 1.23. This indicates the market is still in an overbought condition. The options volume is lower in January’s second weekly expiry. The short build seen in 11,800 to 12,000 put strikes and 11,900 to 12,100 call strikes seen is a long build-up. The remaining strikes have very thin volumes. The India VIX fell by 4.32 per cent and the Nifty implied volatility is at 13.91. The current derivative data suggest that the Max Pain is at 11,950 for the next week.
