The Indian equity markets put their internal strength on display yet again as they heavily consolidated and ended one more time on a flat note. The markets saw a quiet opening on the expected lines and traded absolutely flat and in a narrow range in the first half of the session. Until the afternoon, the NIFTY stayed totally range-bound and took no directional bias. A sudden profit-taking wave gripped the markets as the Index lost ground rapidly. However, in the last hour and half of the trade, NIFTY recovered in an equally remarkable way as it recouped all its losses. The headline index rebounded over 120-points from its low point and ended with a negligible loss of 8.60 points (-0.05%).
Thursday is not only the weekly options expiry day but also the last trading day of the week. Friday will be a trading holiday on the observance of Ganesh Chaturthi. The weekly options data shows that the strikes of 17300 saw maximum Put OI addition; this level also holds the highest Put OI accumulation. This indicates that the level of 17300 is expected to act as potential support if the consolidation continues in the market. Volatility increased a bit; INDIAVIX edged higher by 3.26% to 14.4100.
The levels of 17400 and 17490 will act as potential resistance points; 17300 and 17235 are expected to act as supports.
The Relative Strength Index (RSI) on the daily chart is 81.58; it stays in overbought territory. RSI also remains neutral as it does not show any divergence against the price. The daily MACD is bullish and stays above its signal line. PPO remains positive.
A Hanging Man emerged on the candles. Since it has occurred following an uptrend and near the high levels, it has the potential to make the markets take some breather and push it in some consolidation. However, any such formation will require a confirmation on the next bar.
The pattern analysis shows that the NIFTY has staged a very strong breakout above the 15900-15950 area; it has kept inching higher while taking intermittent breathers. In the process, it has created basing points at each higher level. The most recent basing point remains near 17200 levels, and this makes it an immediate support point in the near term.
All in all, we expect the markets to continue staying range-bound on the expiry day of the weekly options series; this also happens to be the last trading day of this truncated week. We recommend avoiding shorts as there are no definite signs of weakness on the charts. In fact, rebounding from lower levels each time there is some short-lived correction shows the internal strength of the markets. However, in the same breadth, unless the NIFTY moves past the 17500 levels, any aggressive purchases also should be avoided. A continued stock-specific approach while staying alert to any profit-taking wave at higher levels is advised 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)
