While playing out the session on the anticipated lines, the markets extended their up move and ended the day on a decently positive note. The NIFTY saw a positive start to the day. The opening gains saw the markets trading stable until the afternoon trade. While the NIFTY maintained its gains until afternoon, the last hour and a half of the session saw the markets growing even stronger. The NIFTY marked its fresh intraday high towards the end of the session. While sustaining those gains, the NIFTY ended the day on a strong note gaining 184.60 points (+1.10%).
We have weekly options expiry coming up on Thursday. As always, the session is likely to stay dominated with rollovers centric moves. Going by the weekly options data, 16800 and 16900 has seen a significant amount of Put writing taking place. While the highest Call OI stays at 17200, the highest Put OI stands at 16800. Through this data, we can fairly conclude that so long as the NIFTY keeps its head above 16800, the downsides are likely to be limited. However, speaking on the broader terms, if the advance in the markets continues, NIFTY will head towards its next important pattern resistance area of 17200-17350 levels.
Volatility continued to slide; INDIAVIX came off by another 5.46% to 16.5800. If there are no overnight global negative cues to deal with, there are brighter chances of the NIFTY seeing a stable start once again and extending its up move. The levels of 17030 and 17180 will act as immediate resistance points. The supports come in at 16910 and 16835.
The Relative Strength Index (RSI) on the daily chart is 42.08; it stays neutral and does not show any divergence against the price on a 14-day period. However, the pattern analysis of this indicator continues to show a strong bullish divergence against the price. The daily MACD is bullish and trades above the signal line.
A white body emerged on the candles. Apart from this, no other formations were noticed.
The market breadth continued to improve; this phenomenon will have to continue over the coming days. A strong market breadth will be an essential ingredient for any technical pullback to sustain. Overall, if the pullback continues, the next immediate hurdle for the NIFTY can be the short-term 20-DMA which presently stands at 17172. On the lower side defending 16750-16800 would be crucial for the markets to avoid getting pushed under consolidation again.
We recommend navigating the markets very carefully. So long as the zone of 16750-16800 zone is intact, it is strongly advised against creating shorts as what we are witnessing is nothing but short covering from lower levels. While making fresh purchases on a selective note, profits should be protected at higher levels.
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)
