On the anticipated lines, the Indian equity markets inched higher; NIFTY marked a fresh lifetime high and also closed at its highest levels. In yesterday’s note, it was pointed out that the NIFTY had made some room for itself to move higher as the maximum Call OI had shifted higher to 16000 levels. The markets opened on a quiet note, but gradually moved higher and maintained their gains through the day. By the close, the headline Index ended with a net gain of 70.25 points (+0.44%).
Next weeks options data suggests that the NIFTY has visibly shifted its resistance point further higher to 16200 as this strike holds maximum Call OI concentration at the beginning of the fresh options week. From the technical perspective, the NIFTY has increased the chances of a potential resumption of the up move if it is able to keep its head above 15850 levels. So long as these levels are defended, there are possibilities of some incremental up move. A violation of 15850 will mean the markets slipping into consolidation again.
While a stable start to the day is expected, the levels of 16000 and 16045 will act as potential resistance points. The supports come in at 15850 and 15810 levels. The trading range is expected to stay wider than usual.
The Relative Strength Index (RSI) on the daily chart is 62.45; it shows a bearish divergence against the price. While the price made a fresh 14-period high, the RSI did not, and this resulted in a bearish divergence. The daily MACD Is bearish and stays below the signal line.
The pattern analysis shows that the NIFTY marked its previous high of 15915 a couple of weeks back and it consolidated after that in a defined range. This time, it has marked a fresh incremental high; it would be a test to see if this results in a resumption of an uptrend following a sideways consolidation.
All in all, there are possibilities of some resumption in the up move; however, for this to happen, it would be crucial for NIFTY to keep its head above 15850 levels. So long as this level is defended, we may see some more movement on the upside. On the other hand, if 15850 is violated, then the markets may slip into some consolidation again. As we follow the trend, we must not forget that the internal strength and the market breadth is weak and not as much strong as it should be. Because of this, it is recommended to keep trailing stop-losses as we follow the momentum and keep protecting profits at higher levels.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
