Technical View on Nifty as on 04/02/2013

Technical view based on Daily Charts:

Nifty had shown a great bull run bouncing off the major trendline since June 2012. However from December 18th, Nifty had been trading within low volatility above another trendline. But finally, just after Jan expiry, Nifty broke the trendline and closed below it.

This has created a short term bearish view for Nifty. But mid-term and long-term view of Nifty is still bullish. As such mid term and long term investors may use this correction to accumulate value picks for their portfolio.

Nifty has immediate supports at 5977 and 5914. 5914 may likely be the region where the earlier trendline may also converge. From these supports of 5977 and 5914, Nifty may show some bounce. But these bounces may be used to strictly exit long positions and initiate short positions. If the major trendline is also broken, we have next supports at 5885, 5794 and 5702. Immediate resistance for Nifty would be 6094 and closing above it would negate the short term bearish view.

Considering the current Open Interest (OI) of Nifty Options for February 2013 series, the OI for 6100CE, 6200CE and 6300CE are all high over 50 lacs as on date. Nifty futures lost almost all its premium at the start of the series. Max OI for puts currently exists on 6000PE and 5700PE. As Nifty is currently sustaining below 6000, clearly suggests a bearish view on Nifty with max upside of 6100 and max downside of 5700.

We recommend to use the strategy of "Sell on Rise" in this series till further update.

Update: 08/02/2013: As per our view Nifty remained overall bearish. Though Nifty remained within the levels of 5977 and 5914 throughout the week, finally broke down to the next major support of 5885. After the break of the trendline support, Nifty overall looks week. This level of 5885 may likely provide some support to Nifty and we may see some consolidation near these levels or a small bounce to near 5977 levels. We still recommend to "Sell on Rise" till the level of 5977 is not breached.

Update: 15/02/2013: As per our view Nifty remained within the range of 5885-5977 with a bearish undertone. On the last trading session of the week, Nifty opened below the range and traded below it most of the day, but finally gave a strong recovery from weekly support levels of 5854 and also managed to close within the range. Nifty may see some positive move in the coming week and try to test 5977. We recommend to "Trade within Range" till either of the levels of 5885 or 5977 are not breached.