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Trade Setup for Thursday: Top 10 things you should know

Yatheendradas C.k. at 05:19 AM - Aug 03, 2017 ( ) Views: 256

Aug 02, 2017 11:05 PM IST | Source: Moneycontrol.com

Trade Setup for Thursday: Top 10 things you should know before Opening Bell

Traders should stay long and initiate a buy on dips strategy on any fall towards 10,000 levels, suggest experts.

Sunil Matkar  Moneycontrol News

The Nifty rallied to a fresh record high of 10,137.85 on Wednesday but saw selling pressure soon after the Reserve Bank of India (RBI) slashed key rates by 25 bps and made a bearish candle, which closely resembles a Bearish Belt Hold kind of pattern, on daily charts.

A Bearish Belt Hold pattern is formed when the opening price becomes the highest point of the trading day, which in Wednesday’s trading session was a record high of 10,136.30 and rose slightly to a record high of 10,137.85. After opening, the index then witnesses selling pressure throughout the trading session.

In this pattern, there is small or no upper shadow and the index declines throughout the trading day which makes up for the large body and a small lower shadow.


In Wednesday's price action, Nifty50 opened at 10,136.30, which was slightly below its record high of 10,137.85. Hence, there was no or insignificant upper shadow.

It slipped over 80 points to touch its intraday low of 10,054.20 which made a slightly long lower shadow. The index bounced back from its 5-day exponential moving average placed at 10,061 to close at 10,081.50, down 33 points.

Traders are advised to stay long and initiate buy on dips strategy towards any fall towards 10,000 levels. Although, Bearish Belt Hold is a trend reversal pattern but doesn't go short in this market because it still requires confirmation.

As long as Nifty trades above 10,000 levels, the upside remains intact and investors can initiate long positions for the next possible target placed at 10,350 and keep a stop loss at 9,944.

“The Nifty registered a Bearish Belt Hold kind of formation as market participants appear to have read the RBI Monetary policy as a neutral event. However, it is imminent for the index to sustain above 10,087 levels in the next trading session to prevent damage to the short-term trend,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

We have collated top ten data points to help you spot profitable trade.

Key Support & Resistance Level for Nifty:

The Nifty closed above 10,000-mark at 10,081.50, down 33.15 points on Wednesday. According to Pivot charts, the key support level is placed at 10,044.53, followed by 10,007.57. If the index starts to move higher, key resistance levels to watch out are 10,128.13 and 10,174.77.

Nifty Bank:

Nifty Bank closed 67.6 points lower at 25,055.20 on Wednesday. Important Pivot level, which will act as crucial support for the index, is placed at 24,921.34, followed by 24,787.47. On the upside, key resistance level is 25,193.94, followed by 25,332.67.

Call Options Data:

Maximum Call open interest (OI) of 36.42 lakh contracts stands at strike price 10,500, which will act as a crucial resistance level for the index in the August series, followed by 10,200, which now holds 35.58 lakh contracts in open interest, and 10,100, which has accumulated 33.58 lakh contracts in OI.

Call writing was seen at strike prices — 10,200 (8.64 lakh contracts added), followed by 10,300 (4.67 lakh contracts added) and 10,100 (3.92 lakh contracts added).

Call unwinding was seen at strike prices 10,000 (1.7 lakh contracts were shed), followed by 9,500 (0.84 lakh contracts shed) and 9,900 (0.6 lakh contracts shed).

max pain at 9900

Put Options Data:

Maximum Put OI of 48.39 lakh contracts was seen at strike price 10,000, which will act as a crucial base for the index in August series, followed by 9,800, which has accumulated 43 lakh contracts in open interest, and 9,900, which now holds 39.12 lakh contracts in open interest.

Put writing was seen at strike prices 9,800 (1.54 lakh contracts added), followed by 9,600 (1.34 lakh contracts added) and 10,200, which saw an addition of 0.61 lakh contracts.

Put Unwinding was seen at strike prices 9,900 (2.49 lakh contracts shed), followed by 10,000, where 1.23 lakh contracts were shed along with 10,300 (1 lakh contracts were shed).

trade 2

FII & DII Data:

The foreign institutional investors (FIIs) bought shares worth Rs 473.72 crore, while domestic institutional investors sold Rs 232.95 crore in the Indian equity market on Wednesday.

Stocks with high delivery percentage:

High delivery percentage suggests that investors are accepting the delivery of the stock which means that investors are bullish on the stock.

trade 3

40 stocks saw long build-up

trade 4

30 stocks saw short covering:

A decrease in open interest along with an increase in price mostly indicates short covering.

trade 5

79 stocks saw short build-up:

An increase in open interest along with a decrease in price mostly indicates short positions being built up.

trade 6

64 stocks saw Long Unwinding: 

Long Unwinding happens when there is a decrease in OI as well as in price.

trade 7

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