Trade setup for Dec 5: Charts suggest the Nifty 50 may have made a near-term top

Trade setup for December 5: Charts suggest the Nifty 50 may have hit a short-term top

Despite Friday’s decline, the Nifty 50 and BSE Sensex managed to end with weekly gains of 1% each.

The eight-day record run for benchmark Indian stock indices came to an end on Friday. Despite Friday’s decline, Sensex and the Nifty 50 index ended the week with gains of 1% each.

It was the week for the broader markets, with the Midcap index ending up 3%. Other outperformers included metals, with the index ending up 4% for the week, and tech stocks which continue to rebound from their 52-week low. The computer index ended with gains of 2.4% over the past week.

What do the graphs suggest for Dalal Street?

According to Nagaraj Shetti, Technical Research Analyst at HDFC Securities, the Nifty 50 has formed a small negative candle on its daily chart for two consecutive trading sessions. “This pattern indicates a resumption of minor profit bookings in the market from all-time highs,” he said.

In the global context, India now finds itself in a situation where it is one of the few areas where there is no macroeconomic imbalance and where growth is on the agenda, according to Ashwini Agarwal of Demeter Advisors . “I assume India’s macro economy will remain stable and if so, valuations are something investors will choose to ignore,” he said in an interaction with CNBC-TV18 on its Editors Roundtable.

Here are the key things to know about the market ahead of the December 5 session:

Global Markets

Asian markets opened mixed this morning as oil prices rose as China eased some rules. The Nikkei 225 is down 0.1%, as is the Topix, which is down 0.2%.

Australia’s S&P ASX 200 is up 0.3% while South Korea’s Kospi is trading near the flatline. MSCI’s broadest index of Asia-Pacific stocks outside Japan is also trading up 0.2%.

Oil prices are trading with gains of almost 2%.

U.S. Wall Street markets rallied from Friday’s session low, looking past the hotter-than-expected jobs data until the next U.S. Federal Reserve meeting.

The Dow Jones ended up 0.1% after losing as much as 350 points during the session. Even the Nasdaq composite recovered from its 1.6% drop to end almost flat and close the week with gains of over 2%.

What to expect in Dalal Street

HDFC Securities’ Shetti says the Nifty 50’s all-time high of 18,887, which the index scaled on Thursday, can be seen as a new higher high from the current higher, lower pattern. “The current weakness should find a higher floor in the near term,” he said.

The smaller and larger time chart of the index indicates that there is a possibility of a rebound higher from the lows over the next 1-2 trading sessions. Shetti sees immediate support for the Nifty 50 between the 18,550 and 18,450 levels.

Main levels to monitor

For the December 8 weekly options expiry, the 19,000 strike call added 31.14 lakh shares on Friday, while the 18,900 call added 22.68 lakh shares.

On the Put side, the 18,500 strike added 18 lakh shares in Open Interest while the 18,400 Put added another 18.27 lakh shares.

FII/DII activity

Here are five stocks that have seen an increase in open interest as well as price:

Shares Current IO CPM Price change Change of OI
United Breweries 11,83,600 1,749.15 2.10% 25.06%
Oracle Financial (OFSS) 6,25,600 3,240.95 2.90% 12.52%
Vedanta 3,65,05,600 316.15 1.00% 10.31%
L&T Finance Holdings 6,06,74,276 92.10 3.31% 10.21%
JK cement 5,09,250 3,252 0.89% 6.20%

Short accumulation (decrease in price and increase in open interest)

Shares Current IO CPM Price change Change of IO
Eicher engines 35,14,525 3,339.00 -3.39% 14.69%
I call the TV 1,00,57,500 495.70 -0.64% 6.70%
Bajaj Finance 56,03,625 6,726.95 -1.16% 6.00%
Tata Consumer Products 90,81,000 802.40 -2.09% 5.64%
Maruti Suzuki India 31,23,400 8,884.95 -1.64% 5.51%

Short cover (increase in price and decrease in open interest)

Shares Current IO CPM Price change Change of IO
BHEL 9,54,34,500 91.65 7.63% -11.01%
L&T Technology Services 8,27,800 4,291.15 2.87% -10.18%
Polycab India 10,53,900 2,697.30 3.08% -6.97%
Atoul 1,12,725 8,879.20 1.79% -6.82%
Astral 13,56,025 2,036 4.91% -5.23%

Long rollout (decline in price and open interest)

Shares Current IO CPM Price change Change of IO
HCL Technician 1,04,46,100 1,143.80 -0.16% -7.75%
Sun Pharma 1,58,19,300 1,043.40 -0.83% -6.78%
Bank of Baroda 8,25,84,450 172.35 -0.20% -6.75%
Metropolis Health 8,10,300 1,483.50 -0.17% -6.31%
Abbot India 41,360 20,330 -1.87% -5.40%

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