The markets were at their resilient best as they staged a remarkable recovery during the day to close on a strong note. The NIFTY saw a jittery start to the day; it spent the initial minutes of the trade-in a ranged manner. The NIFTY slipped in the green after trading in the positive during the first hour of the day. It seemed that the NIFTY was finding it difficult to penetrate the important 17450 levels; however, the second half of the day saw remarkable recovery taking place. The NIFTY rebounded over 225-points from the low point. It also managed to penetrate and close above the important 17450 levels. The headline index finally ended with a decent gain of 165.10 points (+0.95%).
From the technical perspective, the NIFTY’s crawling back above 17450 is a positive development. This level was the most immediate basing point which the NIFTY had violated. From the most near-term perspective, the zone of 17400-17450 should continue acting as an important support zone for the markets. There was a spate of short-covering from the lower levels; this was evident as the upsurge has resulted in a reduction of net open interest. Moreover, the strikes of 17400 have seen heavy Put writing and OI addition; this shows that this point is may offer support to the markets during the current phase of consolidation.
The volatility, that had spiked in the previous session came off; INDIAVIX slipped by 5.56% to 16.5200. Wednesday is likely to see the levels of 17600 and 17635 as immediate resistance points. The supports come in at 17510 and 17400 levels. The trading range may remain wider than usual over the coming days.
The Relative Strength Index (RSI) on the daily chart is 72.36; it remains slightly overbought. It is neutral and does not show any divergence against the price. The daily MACD is bearish and below its signal line. A white body emerged; apart from this, no other formations were observed.
All and all, the markets are likely to continue to consolidate for some more time in a broad range. So long as the NIFTY is able to defend its most recent basing point, this broad range is likely to be the zone of 17400-17490. So long as the NIFTY is within this zone, we will see the markets continuing to stay highly stock-specific. We recommend staying away from high beta stocks. Purchases should be kept focused on select banking and realty stocks along with other stocks which are defensive in nature and are showing improved Relative Strength against the broader markets. A cautiously positive approach 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)
