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Nifty - Yearly, Monthly & Weekly Expiry Simultaneously; High Volatility Expected; 21600 Strong Resistance

The Correction was overdue, as suggested in our previous technical journal, and it happened. Even though the Nifty Index reached a new all-time high, it could not cross its resistance level of 21600.

Post Market Weekly Analysis

The Nifty 50 weekly Index opened at 21434.80 touched the high level of 21593 and slipped down to 20976.80 before closing at 21349.40. So the benchmark index oscillated in a range of 616.20 points over the previous week's trading sessions, finally closing with a loss of 107.25 points, i.e. in percentage term (-.50%) on a week-on-week basis.

Nifty 50 Index Monthly Chart

After touching its new lifetime high level, the index saw profit booking bouts, because the India Vix reached its near-term peak and then came off from its high. A good fight is going on between bulls and bears, but from an investment point of view, the valuation of the stocks is a little bit on the higher side. Well, till the new financial year budget, we can see a sideways market.

Nifty 50 Index Weekly Chart

As we suggested there was a high possibility of consolidation/correction, and it happened. But we can see that selling in stocks was brought up to a maximum extent. FIIs sold stocks worth rupees in cash 6,300 crores, but DIIs bought 8900 crores and that's why the Nifty index made a new lifetime high again.

Nifty 50 Index Daily Chart

In the last two days of the previous week's trading session, we have seen a comeback of bulls again from the low levels. But we should remember that it is a year closing, as well as monthly and weekly expiry, so we are expecting high volatility in the coming week. 21600-21650 could be a strong resistance for this week.

Nifty 50 Weekly Fibonacci Chart Status

We suggested that correction is a must and 21500 will act as a resistance, but the index touched the level of 21593 before closing at 21349. Now going forward it seems for the coming week 21600 could be a strong resistance.

Nifty 50 Index Weekly Chart -with Technical Indicators

RSI Indicator Pattern

The weekly RSI stays at 73.67; it has marked a new 14-period high which is bullish. However, it remains in the overbought zone and stays neutral while not showing any divergence against the price.

MoneyFlow Indicator

This weekly indicator is at 68.59, which seems a Neutral or limited upside.

MACD Indicator Pattern

The weekly MACD stays bullish while remaining above its signal line.

FII's Cash Weekly/Monthly Activities

With geopolitical concerns on the rise again, foreign institutional investors sold equities worth Rs 6,300 crore in the week gone by. Some analysts have also attributed the selling to the normal course of profit-taking. Meanwhile, domestic institutional investors bought Rs 8,900 crore worth of equities in the week gone by. Nonetheless, FIIs have been bigger buyers than DIIs in the cash market for the month so far.

"FPI inflows which were negative in the previous three months have sharply turned positive in December. Total FPI inflows in December through 22nd is Rs 57,313 crores including the buying through stock exchanges and primary market. FPIs were big buyers in financial services and also bought in sectors like autos, capital goods, and telecom. Since 2024 is expected to witness further declines in U.S. interest rates, FPIs are likely to increase their purchases in 2024 too.

FIIs Positions till the last day of last week in Options & futures

Outlook for the NIFTY 50 Index for the Coming Week

The coming week is a truncated week with Monday being a holiday on account of Christmas. The month has stayed strong so far with Nifty gaining 6.04%; the coming week will see the week, month, as well year coming to a close.

While we did see some jitters on the daily charts, on a week front we continue to remain overextended as the markets have run much ahead of their curve.

The 20-week Moving Average remains 1500 points below while the 50-week Moving Average stays as far as 2472 points below the current levels. This kind of steep deviation from the mean and staying overextended on the charts continues to leave the markets to sharp and volatile profit-taking bouts from current as well as higher levels.

India VIX:

The previous week India VIX closed at 13.70 from 13.12 Within five trading sessions, it touched a high of 15.01 and a low level of 12.22, It gained on a closing basis by

0.5800 (4.42%) on a week-on-week basis.

Support Level for the Coming Week for NIFTY:

The broader support level on the technical chart could be in the range of 21100 followed by the level of 20950 levels.

Resistance Level for the Coming Week for NIFTY:

The broader resistance level on the technical chart could be 21490, followed by 21600 levels.

Crude Oil

Oil prices eased on Friday ahead of the long Christmas holiday weekend on expectations Angola could increase output after leaving OPEC, but rose for the week on positive U.S. economic news and worries Houthi ship attacks would boost supply costs.

Brent futures fell 32 cents, or 0.4 percent, to settle at $79.07 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 33 cents, or 0.5 percent, to settle at $73.56. That left both benchmarks up about 3 percent for the week gone by after gaining less than 1 percent last week.

Important Upcoming Weekly Activities

Red Sea Crisis

The Houthi rebels have declared support for Hamas in the Israel-Gaza conflict and are thus targeting commercial ships traveling via the Red Sea. Several companies have either suspended operations or are diverting vessels, flaring up freight rates as routes get longer and volumes reduce.

As of December 21, about 158 vessels had been re-routed away from the Red Sea carrying over 2.1 million cargo containers. The value of this cargo is estimated to be $105 billion.

The overall logistics costs are bound to rise, which Indian exporters and importers may find difficult to pass on to end users. If the Red Sea conflict lingers on for a long time or the conflict escalates, it could stoke inflationary pressures.

COVID cases

Cases of COVID-19 new JN.1 variant has been rising in India, and the Central government has urged the states to maintain a state of constant vigil and report all influenza-like and severe acute respiratory illnesses. States have also been advised to ensure adequate testing in all the districts as per COVID-19 testing guidelines and maintain the recommended share of RT-PCR and Antigen tests. If the situation worsens, it could spook the markets going ahead.

Technical Analysis

A Spinning Top occurred on the candles. Such a formation is seen when there is little difference between the open and closed levels. This denotes the indecisive behavior of the market participants. Such formations can potentially mark a reversal; however, they need confirmation as well.

The technical analysis on the weekly chart shows that the Nifty continues to

stay above the rising channel after it staged a breakout in the previous week.

In the process, the Index has also dragged its resistance levels higher to 21000 going by the options data. So long as the index stays above 21000 levels, it will just be within capped consolidation. However, any slip below 21000 shall make them incrementally weaker.

Nifty must cross the 21430 level for the continuation of positive momentum up to 21650-21700. It would be a healthy consolidation if Nifty spent some time around the current levels.

Reading Current Option Data

As per the monthly options data, the Nifty 50 Index is expected to face resistance at 21500-21600, while 21200-21000 is likely to act as key support, followed by crucial support at 20800 levels. Overall, the data suggested that the index may remain in the broad range of 20800-21600 levels for the coming days.

On the weekly options data, the 22000 strike owned the maximum Call open interest followed by the 21500 strike with meaningful Call writing at the 22500 strike and then at the 22200 strike and 21800 strike, while the maximum Put open interest was seen at the 21000 strike followed by the 20800 strike with Put writing at 21300 strike and then 21400 strike and 20800 strike.

The 22000 strikes owned the maximum Call open interest, followed by the 21500 strikes & 21600 strikes, with meaningful Call writing at the 22500 strikes, then 22000 & 21800 strikes,

The maximum Put open interest was visible at the 21000 strikes, followed by 21200 strikes & 20800 strikes, with Put writing at 21300 strikes, then 21200 & 21400 strikes.

Participant Wise Final F&O Weekly Summary

FII's, PRO, and Clients F&O Summary by Segment

Summary - Overall

All in all, the method to approach the markets would be on similar lines. If the markets show any incremental upmove, more emphasis and focus would be needed to book and protect profits rather than making new purchases.

The rallies need to be utilized to protect gains; all new purchases must be kept highly stock-specific and selective. While focusing more on the pockets that are showing improving relative strength, it would also be prudent to refrain from over-leveraged exposures.

A highly cautious outlook is advised for the coming week.

Thanks for reading.

Keep Trading

Stay Invested


Neeraj Bhatia

(Managing Director)    

Disclaimer: I am a National Stock Exchange-certified Technical Analyst and Chartist but not a SEBI-registered analyst, so consult your financial advisor before taking any trade. This technical weekly post-market journal is only for learning purposes and it is downloadable free of cost. The views written here are entirely only my personal views. I am not forcing anyone to follow my thoughts. I do not have any WhatsApp Group ID or Telegram ID related to it.

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