Technical View on Nifty as on 28/12/2012

Technical view based on Daily Charts:
Nifty has been trading strong and positive since June 2012. Though the larger trend for Nifty is positive, but Nifty had been trading range bound throughout the December 2012 series. Nifty has formed an accumulation pattern above the support of 5847 but has not yet been able to break above the resistance of 5973. Nifty has been strongly following the trendline, bouncing from it multiple times since June 2012.

What are the likely possibilities ahead?

1. Nifty may break above the resistance of 5973 and head ahead to 6109 and 6298
2. Nifty may continue trade in this range till the trendline support is touched.
3. Nifty may break the support of 5847, and correct to the next major support of 5753 and may also touch the trendline support.

Considering the current Open Interest (OI) of Nifty Options for January 2013 series, the maximum OI for calls currently exists on 6000CE. However, the maximum OI for puts is difficult to pick as of now because of the close proximity of the values. The major contenders for the maximum OI are 5800PE, 5700PE and 5500PE.

Taking the OI into consideration, we may rule out option 1 till there is a major change in the OI data.

As Nifty has already remained in the range for past 20 trading sessions, volatility has come down quite low and may try to break the range very soon. As such, we may rule out option 2 as well.

As we are left with option 3, we may likely expect a minor correction in Nifty quite soon. However, OI of Nifty needs to be watched closely another few trading sessions to get a confirmation.

Update on 02/01/2013:
Nifty broke above the resistance level of 5973. As such Nifty may head ahead to levels beyond 6100. The max OI also shifted from 6000CE to 6200CE opening upsides upto 6200 levels. On the downside 5800PE now holds the max OI, but as Nifty moves up, the OI of higher puts may also increase.