Primary trend remains positive, traders should buy on dips

The week gone by was full of action as the Nifty rallied higher to almost test the milestone of 20000 (high made 19991) on the weekly expiry day. However, the results from the IT giant INFY dampened the sentiment and the index witnessed a correction in last couple of sessions to end Monday’s session below 19700.

Nifty has seen some retracement in last couple of trading sessions as the momentum readings were in overbought zone, and a disappointment in quarterly results of certain index heavyweights led to some pullback move in the index. The RSI oscillator has given a negative crossover in the overbought zone, indicating that the index could continue to see some price-wise or a time-wise corrective phase before resuming the uptrend. In options segment, the call writers are quite as we have entered the monthly expiry week and decent positions are built at 19800 strike price followed by 19900-20000. On the flipside, some unwinding was seen in 19700 put option as the index breached the level which not much high OI is seen in puts. FII’s booked profits on some of their long positions in the index futures, but they still have about 67 percent of the positions on the long side. While the Clients who had around 58 percent short positions took this marginal decline of last couple of session to unwind some of their short positions. Nifty has done with minimum retracements which we usually see in a trended phase which is placed around 19670. If the index sustains below this, then the next retracement support is placed around 19500-19450 range. We believe the index should form a support base around either of these supports and consolidate for a while. However, the primary trend continues to be positive and hence, traders should continue with a buy on dip approach. In this week, market participants would be eyeing a couple of events such as the U.S. Fed policy on Wednesday evening and monthly expiry on Thursday. Any declines towards the above mentioned lower range should be used as buying opportunity.