In the previous technical note, it was mentioned that the price behavior of NIFTY against the levels of 18200 will decide the trend for the day. The Indian equity markets continued to put their resilient foot forward as compared with their peers; showed a strong relative outperformance and ended the day on a strong note. The markets saw a gap up opening; it opened above 18200 levels and remained above that point throughout the day. Although the session stayed range-bound after opening with a gap up, the NIFTY tested its crucial levels. Some paring of gains was seen in the middle of the session but the markets managed to recover again to end at the high point. The headline index ended with gains of 176.80 points (+0.97%).
The markets shall open after a gap of one day; Friday was a trading holiday on account of Dussehra. Monday will see the Indian markets adjusting to the global trade setup. Given the neutral to positive setup, we can expect a stable start to the day on Monday. At higher levels, it is likely that the markets may show some tendency to consolidate. The options data suggest that a lot of Put writing is was seen at 18300 strikes; overall, the November monthly expiry options data suggests a range of 18000-18500 for the NIFTY as of now. This means that even if some incremental up move happens, the upsides may remain capped near 18500 levels.
Monday is likely to see the levels of 18385 and 17440 acting as resistance points. The supports come in at 18300 and 18210 levels.
The Relative Strength Index (RSI) is 75.83; it remains overbought. RSI also continues to show a mild negative divergence against the price. The MACD is bullish and trades above the signal line.
A rising window occurred on the Candles. It is the second such rising widows; such formation results out of a gap up and resolve with the continuation of the uptrend. However, this will need confirmation on the next trading day.
If we interpret the current technical setup and have a look at the pattern analysis, it appears that the NIFYT has its internal strength intact. However, at the same time, looking at the overbought nature and the shedding of OI that was seen in NIFTY current month futures on Thursday, there are high chances that the NIFTY may consolidate once again at current or higher levels. It is unlikely that the NIFTY will move past 18500 levels without taking a breather.
We recommend not shorting the markets at all as the internal strength remains intact and there are no signs that would suggest shorting the markets. On the other hand, we recommend focusing more on the protection of profits at higher levels instead of making new purchases. Fresh buying should be limited and highly selective in nature while avoiding excessive leveraged exposure. A cautiously positive outlook 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)
