Market Trade Setup 6th March
Finally, the rally that everyone was waiting for has come. The 10820-10860 resistance and the 10920-10950 congestion zone which has been holding the market for the last 6 months is just thrown out of the window. Second time in the last 6 months we will cross 11000 mark and the only resistance we have now is the 7th February high of 11070-11120 mark. If that is taken out then we can see Nifty climbing newer highs. Globally things are not that bad with Dow Jones closing absolutely flat with 13 points down. Asian markets are trading mixed today morning with Hong Kong up 130 points while Japan is down 100 points. Brent Crude is trading at 65.3 dollars which means it has more or less settled in that 64-67 dollar zone.
On the domestic front, yesterday’s rally has a lot of meaning to it and it should not be taken as a mere short covering rally. I had extensively written about it in my Tuesday post last night where I equated it to a similar rally that we saw on the first Tuesday of March in 2014 and how it took Nifty 18% up in the next 3 months. Are we looking at something similar? Things are looking in that direction and we need to observe this for another 4-5 trading days and if Nifty climbs that 11100 wall and goes up then we can look at 12500 mark to be achieved by the time results come in by the end of May. Many traders are believing that Modi is coming back again and not only that BJP is on its way towards getting a majority on its own. We need to see this for the next 4-5 days to confirm.
On the derivatives front, there was a lot of action on the Nifty options and we saw a lot of call buying. We have seen 9 calls bought for every put and on the short side, it’s the puts that ruled with 3 puts sold for every call. Long call and short put indicate bullishness which is reflected with Nifty put-call ratio going to 1.76 from 1.68 and now we are getting into the overheated zone. Unless calls are bought sustaining the uptrend in Nifty would be a bit difficult. Yesterday’s turnover in Derivatives went up to 8.4 lakh crore and today we will see it crossing 10 lakh crore. For this week’s expiry 10800 put has the highest open interest while 11000 and 11100 call has almost same open interest. So, we can look forward to Nifty going to 11060-11080 levels in this weekly series itself. For monthly series, open interest is picking up at 11300 call mark and 10900 put mark and we need to see that in the coming days.
What is the Nifty call for the day?
Yesterday I gave a long position with 10900-10920 as a target and we have far exceeded that target and went up to 10980 level. Yesterday, you might have booked profits and if you have not booked it and carried it for today, you will make more profits. Nifty will open above 11000 today between 11000-11020 and 11050-11070 is a resistance zone and there could be some selling that might happen around that level. So, today you will not have the opportunity to enter again. For today, I advise you to take a break and observe where the Nifty closes. If you have a position open from yesterday, close it below 11030 mark and exit.