NIFTY: Reversal on cards?
The Nifty 50 index has shown an amazing recovery since yesterday’s low of 16809.
The NIFTY 50 is a well-diversified 50 stock index. It represents the top 50 Largecap companies based on market capitalization. The rescheduling of index constituents happens bi-annually every year. Reliance Industries, HDFC Bank, Infosys, ICICI Bank, HDFC, TCS and Kotak Bank constitutes nearly 50% weightage of the index.
The Nifty 50 index has shown an amazing recovery since yesterday’s low of 16809. The index has gained about 270 points or 1.6% since then. 200-DMA currently stands at 16800 and happens to be an important support level. Moreover, the index has taken good support at this level before, which makes it a crucial level for traders to watch. On the daily timeframe, the index has made higher low and lower highs which shows convergence and is likely to break one of the limits in days to come. Interestingly, the 14-period daily RSI has also taken support at 40 and has bounced back. The trend indicator ADX is currently at 22 and shows the trend build-up.
Analyzing the Future and Options data, 17500 happens to be strong resistance for this week as it has the highest open interest in the call side. The weekly PCR currently stands at 0.72 and suggests bearishness. Along with this, the 17000 straddles have been created which suggests that the index shall hover around this level. However, today we see that the highest addition of put option has been done at 17000 strike, which suggests a bullish view. Max pain lies at 17050.
Considering the technical analysis and Futures and Options data, we can expect Nifty to trade in a broad range of 16800 and 17500. However, global cues shall also be watched in anticipating further trends of Nifty. Any bad news flow can trigger yet another sell-off, so market participants must be prepared for such events.
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