Today’s trade setup is purely technical analysis on Reliance Industries. Looking at Reliance daily chart we see stock has previously taken support near 700 level, However this support may not give immediate rebound, but consolidate first and then rebound. Chart suggest we are already in consolidation near 700 level, if we switch to weekly chart we see current price action is just taking support at 100 EMA (Exponential Moving Average). Also on carefully watching daily chart you can spot a bullish divergence on RSI (Indicator is pointing higher whereas price action is lower), hence a possibility of pullback. Another confirmation that boosted our confidence on trade was open interest data on Reliance January Future contract. On open interest front, we have seen more than 7% jump in open interest, this may be long positions build up. Even we have seen bullish divergence on weekly chart of NSE Defty index, this Defty index is nifty in form of dollar, i.e dollar weighted index. So there is probability that bounce on major indices is near, hence reliance would be out-performer in that rebound. We will recommend traders to take advantage of this move using Reliance futures January contract, hence Buy Reliance Future near 706 to 709 level for targets as 735 and then 742 level. It is highly recommended to place stop loss just below 695 level.
Traders must stay extremely alert as we are taking trade against the trend.