I missed posting yesterday, but if I had posted I would have talked about the impending correction that was due. It always happens that whenever a test happens at 200dma there is always resistance and that has come yesterday. We have gone below the 10700 mark for a brief period and have managed to hold onto that only through the last half-hour averaging. But today the story is different. The bearish cues that were there yesterday are no longer there globally.
US markets are racing ahead with NASDAQmaking another all-time high and Dow closed another 180 points last night. Today morning the Asian markets are in flat to positive territory with both Hong Kong and Japan mildly up by 50 points. Rupee depreciated a bit yesterday and crossed 75 to the dollar and Brent crude is trading at 43.2 dollars and SGX Nifty is up 20 points, as I am writing this.
On the domestic front, Q1 results for FY-21 is starting today evening with TCS coming out with their numbers. Now, the focus will shift onto the valuations as this the first quarter of the financial year. Nifty’s dependence on global factors would drop and domestic data like CPI inflation and IIP that will come in next one week also will become important. Added to that Covid cases have not peaked out and we will have to see if this happens during this month.
Technically if we add all this then 10850 which is where 200dma is right now is a resistance and 10550 which is the 61.8% of the retracement is the support. If that support is taken out then Nifty will go to 10300 first and then test 10000 mark on the downside. So, it’s the Q1 results that are going to decide whether we cross the 200dma and touch 11000 mark or go back to test the 10000 levels.
On the derivatives front, though there was a fall in the Nifty, there was buying that was happening in Nifty futures and the discount on Nifty futures contracted from 30 points to 9 points now. Today is the Nifty weekly options expiry and the focus will be more on that. Yesterday we did 19.4 lakh crore turnover which means we might touch 30 lakh crore today, which is healthy participation.
Yesterday’s fall brought the Nifty put call ratio from overheated 1.65 to 1.37 levels and it is due to 10800 call added 10.7 lakh contracts and 11100 call added 9.5 lakh contracts. 11000 call and 10800 call have the highest OI on the call side indicating that 10800 will be strong resistance. On the put side, there was the unwinding of positions everywhere and 10600 put has the highest OI indicating 10600-10800 as a range for expiry for today.
What is the Nifty call for the day?
A slightly positive Asian markets mean we will start above 10700 mark around 10710-10740 mark and I feel 10700-10800 will be the tradable range for today. As today is the expiry, there might be swings happening in this range. For me, the trade for the day exists if Nifty is able to protect 10700-10720 range in the first hour and Nifty trades above that. Here you can take a long position with 10780-10800 as the target.
If Nifty goes below 10700 mark during the first hour then I would suggest you to stay away from trading as it becomes very difficult for you to catch the direction of Nifty. The expiry is between 10600-10800 but there are chances that you might get stuck at the wrong end if you play on high volatility. So, trade safe is on Nifty, in 10700-10800 range and stay out if the range is not respected.