Low open interest base at the start of the May series

Nifty resumed its uptrend last week and has rallied higher to almost retest the 18200 mark. The broader markets participated well in this up-move as most of the sectors rallied higher and the midcap and smallcap stocks posted decent gains.

Our markets have rallied sharply recently and the momentum still continues as buying interest is seen in the broader markets. Technically, this is an ‘Impulsive’ rally and thus seems an uptrend that would continue going ahead as well. The rollovers seen during last week were low which is indicating a low base at the start of the May series. Hence, how fresh positions build up in the next few sessions will be important to see. INDIA VIX which is trading at lower levels increased in Tuesday’s session which mainly seems to traders looking to hedge some positions ahead of the FED event. However, this does not seem to be much of a worry as of now. In the options segment, 18200 call options have the highest open interest indicating immediate resistance while the 18000-17900 range will be seen as the support range. Now, the overall trend continues to be up but the momentum readings on the hourly chart for Nifty have reached its overbought zone. Many times, the indices continue to rally in the overbought zone as well when the trend is strong, but such setups do not provide a favorable risk-reward ratio. Hence, we advise readers to avoid aggressive longs here and rather wait for a corrective dip and enter on declines near support. The stock-specific activity continues to be robust and hence, one can focus on stock-specific opportunities for now.