It was the second day in a row where the markets remained listless and lackluster as it ended a day with minor losses. However, from looking at the global perspective, the Indian equities put up a resilient show as it outperformed its Asian peers. Following a weak global trade setup, the NIFTY opened lower on the expected lines; it marked its intraday low in the early minutes of the trade. However, after a subdued start, the NIFTY remained in the negative territory but kept gradually recouping the early morning losses. By late afternoon, NIFTY managed to recover all its losses and also trade briefly in the positive zone. Some recovery was given up in the final hour of the trade; the headline index ended the day with a modest loss of 27.05 points (-0.15%).
We approach the Index weekly options expiry on Thursday. The weekly options data do not offer any major directional cue; it largely hints at the NIFTY staying within a broadly defined range. The levels of 18000 have seen maximum call writing in Wednesday’s session, the NIFTY has still managed to end a notch above that point. As per the weekly data, the strikes of 18200 have the highest accumulation of Call OI; maximum Put OI is on 17800 and 17900 levels with 3.9 million shares. In either case, the opening levels of the markets and its ability to stay above 18000 will dictate the trend for Thursday.
Volatility increased slightly; INDIAVIX climbed by 1.89% to 16.3050. Thursday is likely to see the levels of 18055 and 18130 as immediate resistance points. The supports come in at 17940 and 17880.
The Relative Strength Index (RSI) is 53.45; it is neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line. No major formations were noticed on the candles.
From the pattern and trend analysis point of view, the NIFTY is resting on its crucial support level of 18000. This was the resistance level after the Index had slipped below this point. So, this makes the NIFTY’s price behavior vis-à-vis this level very important when it comes to determining the trend for the immediate near term.
For the markets to avoid slipping into any more consolidation, it would be crucial for the NIFTY to keep its head above the 18000 levels. Any slip below this may invite temporary short-term weakness and may cause the markets to consolidate in a defined range. We recommend avoiding excessive leveraged exposures. While avoiding shorts, all purchases should be kept highly defensive and in those stocks that are showing improving Relative Strength against the broader markets. We expect stock-specific outperformance to continue without any one particular sector staying in the forefront. A cautious and selective 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)
