Trade setup for December 31: Top 15 things to know before the opening bell

Nifty Trade setup for December 31

• Technical and momentum indicators remained bearish; however, the recovery toward the psychological 26,000 mark in the afternoon and the formation of a neutral pattern at the support level (after the recent decline) raised the possibility of a bounce-back in the upcoming sessions.

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The benchmark Nifty 50 finished the session flat with a negative bias on the monthly F&O expiry day on December 30, extending its downtrend for the fourth consecutive day. Technical and momentum indicators remained bearish; however, the recovery toward the psychological 26,000 mark in the afternoon and the formation of a neutral pattern at the support level (after the recent decline) raised the possibility of a bounce-back in the upcoming sessions. In such a case, an upward move toward the 26,100–26,300 zone is possible. However, failure to confirm a rebound in the following session could drive the index down toward the 25,800–25,700 zone, experts said.

Here are 15 data points we have collated to help you spot profitable trades:

1) Key Levels For The Nifty 50 (25,939)

Resistance based on pivot points: 25,969, 25,992, and 26,030

Support based on pivot points: 25,893, 25,870, and 25,832

Special Formation: The Nifty 50 formed a Doji candlestick pattern on the daily timeframe at the support level, indicating indecision between bulls and bears after the recent decline. The index remained below short-term moving averages and the midline of the Bollinger Bands. Momentum indicators continued to signal bearishness, with the RSI sustaining below the 50 mark. All these factors indicate a cautious outlook and the need for confirmation in the next session.

2) Key Levels For The Bank Nifty (59,171)

Resistance based on pivot points: 59,265, 59,391, and 59,596

Support based on pivot points: 58,856, 58,730, and 58,525

Resistance based on Fibonacci retracement: 59,455, 60,875

Support based on Fibonacci retracement: 58,636, 58,287

Special Formation: The Bank Nifty formed a bullish candle, resembling a bullish engulfing-type pattern (not a classical one), on the daily charts after the recent decline, indicating improving sentiment. The index took support at an upward-sloping trendline and climbed above short-term moving averages. It tested but failed to close above the midline of the Bollinger Bands. Momentum indicators turned mildly supportive, with the RSI (53.25) on the verge of a bullish crossover and the Stochastic RSI climbing above the reference line. The MACD stayed below the reference line, though weakness in the histogram faded. All these factors indicate emerging strength, though confirmation is still awaited.

3) Nifty Call Options Data

According to the weekly options data, the 26,000 strike holds the maximum Call open interest (with 69.13 lakh contracts). This level can act as a key resistance level for the Nifty in the short term. It was followed by the 26,300 strike (46.02 lakh contracts) and 26,200 strike (45.88 lakh contracts).

Maximum Call writing was observed at the 26,000 strike, which saw an addition of 37.6 lakh contracts, followed by the 26,300 and 26,200 strikes, which added 19.03 lakh and 16.18 lakh contracts, respectively. There was hardly any Call unwinding seen in the 25,200-26,700 strike band.

4) Nifty Put Options Data

On the Put side, the maximum Put open interest was seen at the 26,000 strike (with 48.47 lakh contracts), which can act as a key level for the Nifty in the short term. It was followed by the 25,900 strike (41.2 lakh contracts) and the 25,600 strike (40.29 lakh contracts).

The maximum Put writing was placed at the 25,900 strike, which saw an addition of 25.67 lakh contracts, followed by the 26,000 and 25,600 strikes, which added 23.74 lakh and 21.35 lakh contracts, respectively. The maximum Put unwinding was seen at the 26,400 strike, which shed 14,885 contracts, followed by the 26,350 strike, which shed 4,420 contracts.

5) Bank Nifty Call Options Data

According to the monthly options data, the maximum Call open interest was seen at the 59,500 strike, with 14.95 lakh contracts. This can act as a key resistance level for the index in the short term. It was followed by the 60,000 strike (9.1 lakh contracts) and the 61,000 strike (5.04 lakh contracts).

Maximum Call writing was observed at the 61,000 strike (with the addition of 1.56 lakh contracts), followed by the 59,000 strike (81,210 contracts) and 59,100 strike (66,060 contracts). There was hardly any Call unwinding seen in the 57,250-61,000 strike band.

6) Bank Nifty Put Options Data

On the Put side, the 59,500 strike holds the maximum Put open interest (with 15.39 lakh contracts), which can act as a key level for the index. This was followed by the 59,000 strike (7.22 lakh contracts) and the 58,000 strike (5.19 lakh contracts).

The maximum Put writing was placed at the 59,000 strike (which added 1.81 lakh contracts), followed by the 59,500 strike (74,340 contracts) and the 57,500 strike (74,280 contracts). The maximum Put unwinding was seen at the 59,900 strike, which shed 1,020 contracts, followed by the 60,800 and 60,900 strikes, which shed 270 and 210 contracts, respectively.

7) Funds Flow (Rs crore)

8) Put-Call Ratio

The Nifty Put-Call ratio (PCR), which indicates the mood of the market, jumped to 0.92 on December 30, compared to 0.68 in the previous session.

The increasing PCR, or being higher than 0.7 or surpassing 1, means traders are selling more Put options than Call options, which generally indicates the firming up of a bullish sentiment in the market. If the ratio falls below 0.7 or moves towards 0.5, then it indicates selling in Calls is higher than selling in Puts, reflecting a bearish mood in the market.

9) India VIX

The fear index, India VIX, attempted to extend the previous day’s upward move but failed and closed 0.44 percent lower at 9.68. It remained below all key moving averages, which provides comfort to bulls.

10) Long Build-up (7 Stocks)

A long build-up was seen in 7 stocks. An increase in open interest (OI) and price indicates a build-up of long positions.

11) Long Unwinding (105 Stocks)

105 stocks saw a decline in open interest (OI) along with a fall in price, indicating long unwinding.

12) Short Build-up (14 Stocks)

14 stocks saw an increase in OI along with a fall in price, indicating a build-up of short positions.

13) Short-Covering (83 Stocks)

83 stocks saw short-covering, meaning a decrease in OI, along with a price increase.

14) High Delivery Trades and High Rollovers

Here are the stocks that saw a high share of delivery trades. A high share of delivery reflects investing (as opposed to trading) interest in a stock.

Here are the stocks which saw the highest rollovers on expiry day.

15) Stocks Under F&O Ban

Securities banned under the F&O segment include companies where derivative contracts cross 95 percent of the market-wide position limit.

Stocks added to F&O ban: Nil

Stocks retained in F&O ban: Nil

Stocks removed from F&O ban: Sammaan Capital