Trade Setup for December 17: Nifty consolidation may continue till the Fed rate outcome

After a session that tested every ounce of human emotion on Friday, the Nifty was back into consolidation mode, trading in a range and eventually ending with a negative bias, giving up some part of the huge recovery it saw on Friday. However, like it did before Friday’s session of extremes, the Nifty respected both sides of the range on Monday as well.

22 central banks are about to declare their monetary policy decisions this week. This includes the likes of the US Federal Reserve, Bank of England and the Bank of Japan. While most of their interest rate actions are priced in by the market, their commentary on the road ahead is what is keeping the market participants nervous.

Monday’s 180-point range on the Nifty saw the index manage to defend 24,600 on the downside, but crossing 24,800 continued to remain a struggle. Therefore, the week before last’s high of 24,857 continues to remain an important pivot point for the index if it has to ensure a smooth move towards the 25,000 mark. On the downside though, multiple supports have now emerged at 24,600 and even 24,500 on the downside, before the 50-Day Moving Average at 24,400.

Advance-Decline was nearly at par but the advances managed to outnumber the declines on Monday. 67 stocks on the Nifty Midcap Index and 58 of the Nifty Smallcap index ended the session with gains.

Both foreign and domestic institutions were net sellers in the cash market on Friday, albeit in small quantities.

The near-term uptrend of the Nifty is intact and the market will eventually see an upside breakout of the 24,800 hurdle, said Nagaraj Shetti of HDFC Securities. He continues to advise a buy on every dip with immediate support at 24,550 as the long-term weekly chart is still in an uptrend.

Shrikant Chouhan of Kotak Securities believes that 24,600 – 24,550 will be key support levels for day traders, while 24,800 – 24,850 will act as a barrier for the Nifty. He said that traders may exit their long positions in case the index falls below the 24,550 mark.

The Nifty Bank traded in a 400-point range on Monday and also made multiple attempts at scaling the 53,800 mark on the upside, but failed in all of those attempts, eventually cooling off from the day’s high 53,738 and ending exactly where it did last Friday. The index is still 900 points away from its previous record high of 54,467.

Om Mehra of SAMCO Securities said that the trend on the hourly chart remains strong as long as the index holds above its middle Bollinger band and the Relative Strength Index (RSI) is above 60, which currently is at 63. The support is placed at 53,000, while resistance on the upside is at 54,100.

The Nifty Bank has formed a modest green candle on the daily chart with short-term resistance at 53,800 – 54,000, said Hrishikesh Yedve of Asit C Mehta Investment Interrmediates, who expects the Nifty Bank to continue consolidating between 52,500 – 54,000. The index must sustain above 54,000 to continue its upward trend, else the consolidation will continue, he added.

What Are The F&O Cues Indicating?

Nifty 50’s December futures added 0.2% or 20,750 shares in Open Interest on Monday. They are now trading at a premium of 70.25 points from 62.45 points earlier. On the other hand, Nifty Bank’s December futures shed 0.2% or 4,200 shares in Open Interest on Monday. Nifty 50’s Put-Call Ratio is now at 0.9 from 1.12 earlier.

Metropolis and PVRINOX are out of the F&O ban.

Granules India, Hindustan Copper, Manappuram, NALCO, RBL Bank and SAIL remain in the F&O ban list.

Nifty 50 on the Call side for December 19 expiry:

On the Call side, the Nifty 50 strikes between 24,700 and 25,000 have seen Open Interest addition for this Thursday’s weekly expiry.

Nifty 50 on the Put side for December 19 expiry:

On the Put side, the Nifty 50 strikes between 24,600 and 24,700 have seen Open Interest addition, while the 24,000 strike saw the maximum addition.

Fresh long positions were seen in these stocks on Monday, meaning an increase in both price and Open Interest: