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Oct 08,2020-Nifty showing signs of fatigue, avoid high-beta play.

The market got stronger and kept marking incremental highs after trading within a range in the morning session. The headline index ended the day well above the 11,700 level while posting a net gain of 76.45 points or 0.66 percent.


Although Nifty has kept on making incremental gains, there are some signs of fatigue at current levels. The market breadth also appears to be losing its strength with each subsequent up move and this is a sign of some tiredness in the market. We have weekly options expiry coming up and this will guide the trend for the next trading session. The 11,700 level saw maximum adding of Put Open Interest. The 11,800 Call holds maximum Open Interest, and this level may act as resistance tomorrow.


Thursday's session is likely to see the levels of 11,780 and 11,825 acting as resistance points, while support will come in at 11,670 and 11,600 levels.


Some more incremental up move cannot be ruled out. However, that being said, the market has now increased possibilities of some reactive moves from current and higher levels. The market breadth has got a bit weaker and some signs of fatigue is seen at current levels. Any up move from now on is likely to meet with profit taking bouts at higher levels.


Given the present technical setup, we recommend avoiding high-beta play and a blind chase of momentum on the upside. There are higher chances of moves meeting with profit-taking bouts and therefore sticking to defensives like consumption, pharma, etc, would not only be a prudent approach but would also offer a better risk-reward perspective as well.



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