Trade setup for January 7: Hopes for bulls to make comeback from lows; Key things to know before opening bell

Trends on SGX Nifty indicated a cautious opening for Indian benchmark with a 22-point gain. The Nifty futures were trading at 17,841 on the Singaporean Exchange.

Trade setup
Trends on SGX Nifty indicate a cautious opening for the index in India with a 22-point gain

Bears dominated Dalal Street on Thursday as Indian equity markets snapped the 4-day winning streak to end in red. Both benchmarks BSE Sensex and NSE Nifty opened gap down and witnessed selling pressure in line with global peers. While Sensex fell 621.31 points to close at 59,601.84, the Nifty50 declined 179.40 points to 17,745.90. However, broader markets closed in green with minor gains of 0.2%. “While the market trend might be volatile in the near term on account of potential risk from Omicron variant, upcoming budget and fragile global cues, in the long run, strong earnings delivery along with positive macro-economic data would hold the key to drive markets”, said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

Key things to know before opening bell

Global markets:

Large technology companies’ stocks pulled down all three Wall Street indices on Thursday. Headline S&P 500 index fluctuated between gains and losses before closing 4.53 points, or 0.1%, lower at 4,696.05. The Nasdaq and the Dow Jones also fell, while small-company stocks bucked the market trend to close higher. The Dow Jones Industrial Average fell 170.64 points, or 0.5%, to settle at 36,236.47 while the tech-heavy Nasdaq fell 19.31 points, or 0.1%, to 15,080.86. The Russell 2000 index of smaller companies, on the other hand, rose 12.37 points, or 0.6%, to 2,206.37. This week, S&P 500, Dow and Nasdaq have fell 1.5%, 0.3% and 3.6% respectively.

Asian markets rose on Friday following heavy losses in some regional markets in the previous session, as investors continue to assess the Hawkish Fed. Japan’s Nikkei 225 rose 0.55%, recovering partially from the nearly 3% drop on Thursday while the Topix index advanced 0.37%. Mainland Chinese stocks traded in green as the Shanghai composite index climbed about 0.2% and Shenzhen component edged 0.334% higher. Hong Kong’s Hang Seng index also jumped 0.76%. South Korea’s Kospi rose 1.12%. MSCI’s broadest index of Asia-Pacific shares outside Japan was trading 0.67% higher.

Technical view

After showing an excellent upmove in the last four sessions, Nifty encountered profit booking on Thursday and closed the day lower by 179 points amidst high volatility. After opening with downside gap of 157 points, the market slipped into further weakness in the early part of the session. It later showed high volatility by the way of intraday up and down swings in the mid to later part of the session. The opening downside gap remains unfilled. A small negative candle was formed on the daily chart with upper and lower shadow. Technically this pattern indicate minor trend reversal on the downside with high volatility. This action in the underlying considered as a high wave type candle formation. Normally, high waves after an upmove or down move could indicate trend reversal post confirmation. Hence, there is a hopes for bulls to make a comeback from the lows, said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

After a display of strong upside momentum and the negation of bearish chart pattern of lower tops and bottoms on the daily chart recently, the Nifty seems to have unfolded a bullish pattern of smaller degree higher highs and lows as per daily timeframe chart. As per this pattern we are not expecting any sharp decline from here and the buying is expected to emerge from the lower levels post minor dip in the market. Four sessions of bull run has been halted on Thursday with sizable downward correction. The chances of sharp downward reversal as we had seen in the past is ruled out in the short term, he added.

Key support, resistance levels for Nifty

Nifty fell as expected after a strong four day upmove. However the advance decline ratio is still at 1:1 suggesting broad market strength amidst selling in index heavyweights. Local traders are accumulating mid and smallcap stocks ahead of the Union budget and Corporate results for Q3FY22. 17828 will now be a resistance for the Nifty in the near term while 17640 will be a support, said Deepak Jasani, Head of Retail Research, HDFC Securities.

Bank Nifty

Bank Nifty slipped 205.65 points to close at 37,490.25 on Thursday (6 January). At present, Bank nifty has support at 36,700 levels while resistance at 38,000 levels, according to Sachin Gupta, AVP, Research, Choice Broking.

FII and DII data

Foreign institutional investors (FIIs) net purchased Indian equities worth Rs 1,926.77 crore on Thursday while domestic institutional investors (DIIs) purchased Indian equities worth Rs 800.91 crore, according to provisional data available with NSE.

Call option data

Maximum Call open interest was seen at 18000 strike which holds 20.79 lakh contracts, followed by 17500 strike (14.68 lakh contracts), and 18500 strike (11.84 lakh contracts). Call writing was seen at 17700 strike, which accumulated 2.12 lakh contracts, followed by 17800 strike (1.89 lakh contracts), and 18400 strike (1.24 lakh contracts).

Put option data

Maximum Put open interest was seen at 17000 strike which holds 33.51 lakh contracts, followed by 17500 strike (30.91 lakh contracts), and 17200 strike (15.60 lakh contracts). Put writing was seen at 17400 strike, which added 3.68 lakh contracts, followed by 17500 strike (3.38 lakh contracts), and 17700 strike (2.17 lakh contracts).

Stocks under F&O ban on NSE

RBL Bank is the only stock under the F&O ban for Friday (7 January). Securities in the ban period under the F&O segment include companies in which the security has crossed 95 percent of the market-wide position limit.

Analysts/Investors Meeting, Company results on January 7

Company results on January 7: GM Breweries, and SPS International will release quarterly earnings today

Krsnaa Diagnostics: Officials to meet Edelweiss Broking, and Khambatta Securities

Capital Trust: Officials to meet Incofin Investment Management

Antony Waste Handling Cell: Officials to meet investors and analysts

Allcargo Logistics: Officials to meet Sell Side Analyst

Motherson Sumi Systems: Officials to meet investors

SGX Nifty

Singapore Exchange (SGX) Nifty futures, an early indicator of the Nifty index, were up 22 points or 0.1 percent at 17,841.5 on Friday hinting at positive start for Indian benchmarks.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express Telegram Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.