December started on a positive note

The December series started on a positive note as we witnessed higher-than-average rollovers last which indicated that most of the long positions in the index futures were rolled over from November to the December series. Nifty clocked a new record of 18887 at the start of December month and has cooled off a bit in the last couple of trading sessions. 

The cool-off in indices in the last couple of sessions seems mainly because the momentum readings on Nifty hourly charts were significantly overbought. Also, FII’s have trimmed off some of their long positions and have booked some profits due to which their ‘Long Short Ratio’ has reduced from 75 percent to 65 percent now. Still, the majority of their positions are still on the long side which is a positive sign. Also, both Nifty, as well as Bank Nifty, have not broken their immediate supports and hence, it seems more of a time-wise correction as of now. Until the indices break their important supports it's better not to preempt any reversal. There are several events this week such as Gujarat Elections and the RBI Monetary Policy which could lead to the next directional move in the indices. Hence, one should keep a close watch on the trader's reaction to the outcome of the event which would dictate the near-term trend. The immediate support for Nifty placed around 18550 which is the trendline support, followed by the 20- day EMA support at around 18400. If the index manages to hold these supports, then another leg of up move could be seen towards the 18900-19000 range.