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Tech view: Nifty50 likely to attempt pullback; traders should avoid shorts

Market sentiment remained cautious ahead of the US Fed’s rate decision.

Jun 19, 2019, 05.18 PM IST
Nifty50 remained highly volatile throughout Wednesday, as it moved in both directions in a 177-point range before signing off with a black candle on the daily chart.

Market sentiment remained cautious ahead of the US Fed’s rate decision later tonight.

The equity benchmark pared all of the day’s gain in the second half and settled unchanged at 11,691. After opening 53 points higher at 11,744, the index hit an intraday high and low of 11,802 and 11,625, respectively.

In this process, the index formed a higher top but lower bottom on the daily charts.

“Apart from a black body that occurred on the candles, no important formations were seen. We continue to expect the market to attempt more pullbacks,” said Milan Vaishnav, Technical Analyst, Gemstone Equity Research and Advisory.

The session remained technically important for Nifty as it continued to defend the 50-day moving average, which not stands at 11,681.

“Sustaining above the 50-DMA on closing basis indicates that there can be a decent pullback attempts going forward, which will be confirmed on a close above 11,800 level,” said Muzhar Mohmmad, Chief Strategist – Technical Research & Trading Advisory,

“In that scenario, initially, a modest target of 11,920 can be expected. Traders are advised to avoid shorting the index whereas those with high-risk appetite can create a positional bet on the long side with a stop loss below 50 DMA on closing basis,” he said.

On the options front, maximum Put open interest (OI) was at 11,500 followed by 11,700 level, while maximum Call OI was at 12,000 followed by 11,800. There was Call writing at 11,800 followed by 11,700 while Put writing was seen at strike price 11,700.

Sahaj Agrawal, Head of Derivatives, Kotak Securities, said Nifty continues to consolidate in a broad range between 11,650 and 12,000 levels with buying support at the lower end of the range.

“We expect a bounceback towards the 11,850-11,900 range from current levels. The health of the broader market continues to be weak and, hence, the pace of recovery is expected to remain slow. Private banking and cement stocks are expected to lead while metals and auto stocks are likely to see weakness,” Agrawal said.
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