Nifty seems to have hit the overbought zone as most of the key indicators are displaying signs of extreme optimism. On the daily scale, the occurrence of a ‘Hanging Man’ formation alongwith its corresponding relative strength index (RSI) value quoting around 75 compliments the over optimism. Market breath, too, has been in favour of declines as the advance-decline ratio has been tilting in favour of the declines since last couple of days.
The bullish baton has been with some of the key largecap names while profit booking in mid-caps has been evident. On the derivative end, the highest CE OI concentration still rests firm at 11,500 which could cap the upside for time being while the incremental supports now stand around 11,200-11,100 zone. Though on the absolute price, the reversal is not established. Hence, the setup looks ideal for booking profits and await for a meaningful decline or time consolidation for any fresh long commitments. 11,340-11,500 zone seems like the termination zone of the ongoing upmove which commenced from 10,580. Hence, traders are advised to refrain from fresh longs and book profits in their existing positions.
SELL: JSPL Futures
‘Double Top’ formation around its 200-double exponential moving average (DEMA) alongwith a negative divergence on the daily RSI is a compelling reason for some short-term bearish commitments. Incremental activity in 180 CE strike which stands with the highest concentration could be the immediate headwind for the next few days. Trading shorts could be deployed within the range of Rs 168-172 with a stop above Rs 175 with an anticipation of a pullback move towards its 20-DEMA placed around Rs 160.
SELL: LIC Housing Finance Futures
Consecutive Inverse Hammers near the upper end of the ongoing rising channel pattern could be a trigger for a mean reversion play. Shorts could be considered on a breach below Rs 500 with a stop above Rs 512 for an initial positional target upto Rs 470.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.