See strong support for Nifty around 10,418 levels

As per the options data, the support level for Nifty has shifted lower in the May expiry compared to last week.

Abhishek Mondal

The Nifty managed to end its losing streak on Tuesday. However, it again closed in the deep red on Wednesday at 10,430.35 levels, which does not augur well for the bulls.

Selling pressure intensified during the latter part of Wednesday’s session and dragged the index below its crucial 10,470 (50-day daily moving average) levels. Overall, the Indian market is witnessing sustained pressure due to rise in crude oil prices, weakness in the rupee versus the dollar and the political drama unfolding in Karnataka which impacted sentiment as investors were predicting an easy win for the Bharatiya Janata Party in next year’s general elections.

The relative strength index (RSI) on the daily chart stands at 37.19 and is showing a downward momentum. The moving average convergence divergence (MACD) is trading above the zero line with a negative crossover, which indicates that the bias could remain bearish for the next few trading sessions.

India VIX ended up 4.08 percent at 14.15. An increase in VIX suggests limited upside and a consolidated down move in the market.

On the daily scale, Nifty has immediate support around 10,418 levels (38.2 percent retracement of the January to March downfall). If it manages to sustain below these levels, then the next levels to watch out for will be 10,328 (200-DMA) and 10,239 (23.6 percent retracement of the January to March downfall). 10,470 (50-DMA) and 10,563 (50 percent retracement of the January to March downfall) will act as an immediate resistance.

On the options front, maximum call open interest of 55.70 lakh contracts is seen at strike price 10,800, followed by 11,000, which now holds 48.50 lakh contracts. Maximum put open interest of 49.05 lakh contracts is seen at strike price 10,500, followed by 10,400, which now holds 38.67 lakh contracts, and 10,300, which now holds 34.40 lakh contracts.

As per the options data, the support level for Nifty has shifted lower in the May expiry compared to last week and the immediate support is seen around 10,400 and 10,300 levels, whereas 10,800 will act as stiff resistance.

Here is a list of top three stocks that could deliver 3-7% return in the short-term:

United Breweries Ltd: Buy | Close: Rs 1,177.65 | Target: Rs 1,265 | Stop loss: Rs 1,126 | Return: 7.42%

On daily scales, UBL has taken support around its 20-DEMA and bounced back with higher volumes, which suggests that the stock has made a temporary bottom at around Rs 1,080 levels.

The Daily Relative strength index (RSI) and MACD are both in selling mode whereas (+) DI trading above (-) DI. Based on the above observations, positional traders can buy the stock at around current levels and add on dips around Rs 1,160-1,065 with a stop loss below Rs 1,126 (closing) for the target of Rs 1,265.

Divi's Laboratories Ltd: Sell | Close: 1093.65 | Target: Rs 1040 | Stop loss: Rs 1138 | Return: 5.45%

The stock has given a close below its 50 percent retracement level of March to May up move around Rs 1,124 on Tuesday with higher volumes, which indicates that the bias could remain bearish for the next few trading sessions.

The Daily Relative strength index (RSI) showing downward move and MACD continuously trading below the signal line suggests limited upside.

Based on the above observations, the stock is likely to move down in the near-term. A trader can sell the stock after some technical bounce back around Rs 1,100-1,110 with a stop loss above Rs 1,138 (closing basis) for a target of Rs 1,040

Tata Communications Ltd: Sell | Close: 610.75 | Target: Rs 598 | Stop loss: Rs 627 | Return: 3.40%

In the daily scale, the stock has taken resistance around its 20-DEMA and falling down with moderate volumes. The Daily Relative strength index (RSI) and MACD both are in selling mode whereas (-) DI just cross above (+) DI.

Based on the above observations the stock is likely to move down in the near term. Traders can sell the stock in a rally around Rs. 617-620 with a stop loss above Rs 627 (closing basis) for the target of Rs 596.

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