The overbought Indian equities continued their rally on the last day of the week as they went on to end yet another day with gains. After a quiet start to the day, the NIFTY largely consolidated as it twice pared its gains to test the previous close levels during the day. While it looked that the index may have a range-bound consolidation, the last hour and a half of the session took the markets higher. The NIFTY went past the important 17300 levels and ended with net gains of 89.45 points (+0.52%).
The markest remain evidently overbought; more steeply overbought on the daily charts. This makes some range-bound consolidation almost imminent. However, the F&O data continues to show inherent strength and short-term buoyancy. The current week not only saw the PUT unwinding happening in the 17200-17300 levels, it also saw fresh Call writing taking place at 17500 levels. This indicates that NIFTY is trying to make some more room on the upside. The volatility continued to rise with the markets; INDIAVIX edged higher by 2.12% to 14.5425.
With a modestly positive start expected to the day, the levels of 17400 and 17465 are likely to act as probable resistance points while NIFTY stays in uncharted territory. The supports may come in at 17265 and 17180. The trading range for the markets is likely to stay wider over the coming days.
The Relative Strength Index (RSI) on the daily chart is 82.61; it is in the overbought territory. RSI, however, stays neutral and does not show any divergence against the price. The daily MACD is bullish and trades above its signal line. A white body occurred on the candles. Apart from this, no other formations were noticed.
The pattern analysis of the daily chart shows NIFTY trading in uncharted territory. After a major breakout above the 15900-15950 zone, the Index has kept moving higher with minor consolidations in between for few days. In the process, it has kept dragging the supports higher. In the immediate short-term, 16600-16800 is the major short-term support area for the markets if a broad consolidation happens.
Focussing again on the immediate near-term, given the F&O data that shows continued inherent strength in the markets, it would be prudent to chase the up moves with eyes wide open while vigilantly guarding profits at higher levels. Aggressive shorts are not advised as there are no signs of any corrective actions by the markets. The shake-outs, whenever they have happened have stayed just intraday. So, while continuing to avoid shorts, it is recommended that a stock-specific approach with strict trailing stop loss levels should be followed for the day.
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)
