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Trade setup for Dec 6: Nifty 50 may register a bounce after taking support at the 10 day moving average

Trade setup for Dec 6: Nifty 50 may register a bounce after taking support at the 10-day moving average

Trade setup for Dec 6: Nifty 50 may register a bounce after taking support at the 10-day moving average
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By Hormaz Fatakia  Dec 6, 2022 6:16:17 AM IST (Updated)

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Benchmark indices recovered from the day's low to end flat on Monday.

India's benchmark indices were on course to decline for the second consecutive session but staged a recovery in the second half of trade to end at the flat line.

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Both Sensex and the Nifty closed little changed from Friday's levels. However, the indices of major banks as well as state-run lenders outperformed the benchmarks. Other outperformers on Monday were Metal stocks.
In an interaction with CNBC-TV18 on Monday, Manish Kumar, CIO of ICICI Prudential Life Insurance said that they are constructive on the equity market from a long-term perspective and that the economy is doing well despite nearly 200 basis points hike in interest rates. However, he predicts some short-term volatility.
"If I have to take a view for the next 12 months, while we are positive from a long term standpoint, one should be bracing for some short term volatility, because at the margin, US Fed has been tightening, even though the pace of tightening is going to be more gradual and at the margin domestic liquidity is also moderate," he said.
What do the charts suggest for Dalal Street?
According to Nagaraj Shetti, technical research analyst at HDFC Securities, the market is forming a bullish hammer type candle pattern. Usually, such a pattern after a correction calls for caution for short positions and more often results in upside bounces from the lows.
Siddhartha Khemka of Motilal Oswal Financial Services also expects the market to consolidate for the next few days given the RBI policy on Wednesday and the Gujarat election outcome the day after. However, he expects some reaction based on the Gujarat exit-poll data that was released on Tuesday.
Here are key things to know about the market ahead of the December 6 session:
SGX Nifty
On Tuesday, Singapore Exchange (SGX) Nifty futures — an early indicator of the Nifty index — declined 70 points points or 0.37 percent to 18,741, thereby pointing to a negative opening for the market.
Global Markets
Benchmark indices in the Asia-Pacific have opened lower, mirroring last night's sell-off on Wall Street, on fears that the US Federal Reserve will keep raising interest rates.
The Nikkei 225 in Japan and the Topix index are down 0.2 percent each while the Kospi of South Korea has shed over a percent. The Kosdaq index, the South Korean counterpart of the Nasdaq, is also trading 1.2 percent lower.
An MSCI gauge of Asia-Pacific shares ex-Japan traded with cuts of 0.5 percent.
On Wall Street, the Dow Jones fell nearly 500 points while the S&P 500 slumped nearly 2 percent, as did the Nasdaq.
What to expect on Dalal Street
According to Shetti of HDFC Securities, the Nifty 50 reversed from its immediate support of the 10-day exponential moving average and also a trendline support as per the index's daily chart. He believes that Monday's low of 18,591 will be the new "higher bottom" in the "higher top, higher bottom" sequence.
"The minor downward correction in Nifty is about complete and the market is set to show upside bounce from the lows in the short term," he said.
Key levels to watch out for
For the weekly options expiry on Thursday, December 8, the Nifty's 19,000 strike call has added 8.7 lakh shares while the 18,900 call added another 7.2 lakh shares in Open Interest.
On the down side, Open Interest addition was seen in the 18,600 put option, which added 5.4 lakh shares while the 18,500 put added close to 9 lakh shares.
FII/DII activity
In an interaction with CNBC-TV18 on Monday, Gautam Trivedi of Napean Capital mentioned that money typically moves from higher valuation to lower valuations and that foreign institutional investors will find South Korea and China to be more attractive in comparison to the Indian market.
He expects India to have a deep impact on either inflows or outflows of another $5 billion.
Long build-up
Here are five stocks that saw an increase in open interest as well as price:
StocksCurrent OICMPPrice ChangeOI Change
Piramal Enterprises59,39,175912.955.32%12.16%
M&M Financial2,03,00,000243.005.72%11.51%
GNFC74,39,900602.700.27%10.46%
Hindalco2,07,67,905483.454.24%9.70%
City Union Bank80,50,000197.52.23%9.00%
Short build-up (Decrease in price and increase in open interest)
StocksCurrent OICMPPrice ChangeOI Change
Navin Fluorine4,45,0504,429.40-0.50%29.11%
JK Cement5,38,5003,215.05-1.35%5.74%
Bajaj Finance59,22,8756,714.00-0.29%5.70%
Aarti Industries27,63,350677.45-0.22%5.38%
Biocon2,10,01,300281.6-1.50%5.07%
Short Covering (Increase in price and decrease in open interest)
StocksCurrent OICMPPrice ChangeOI Change
Info Edge14,45,7504,086.050.25%-6.56%
Coal India2,86,69,200232.901.97%-6.53%
HDFC1,51,49,4002,695.000.32%-4.87%
United Breweries11,27,6001,757.250.43%-4.73%
ICICI Bank6,60,64,625939.50.40%-4.48%
Long Unwinding (Decrease In Price & Open Interest)
StocksCurrent OICMPPrice ChangeOI Change
Persistent Systems4,52,8504,285.05-2.20%-13.47%
Britannia12,85,0004,418.00-0.81%-5.79%
Nestle India2,72,04019,895.95-0.11%-5.50%
Gujarat Gas48,58,750510.10-1.84%-5.10%
Coforge5,74,6504,189-1.30%-4.96%
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