The Indian equity markets continued their unabated up move for the fourth day in a row; went on to end yet another day with gains. The NIFTY saw itself opening on a flat note and spent the morning session trading around its previous close levels. The markets headed nowhere and traded in a sideways trajectory in defined trade. It was from the afternoon that the markets started to gather strength. It went on to add incremental gains for the remainder of the session. The NIFTY maintained its levels until the end of the session; it closed net gains of 120 points (+0.67%).
We enter the weekly options expiry on Thursday. The previous session showed heavy Put writing at 17800 and 17900 levels. On the other hand, the highest Call OI stands at 18000 levels. This indicates that the NIFTY is likely to see resistance at 18000 on the upside thus leaving its up move capped for Thursday. The most likely trading range for NIFTY on Thursday is likely to be 17800-18000 levels. This also means that it is time for the markets to take some breather after almost 1500-points of a technical pullback from the most immediate low point seen in December 2021.
Thursday is likely to see the levels of 17980 and 18030 acting as immediate resistance levels. The supports come in at 17860 and 17800 levels.
The Relative Strength Index (RSI) on the daily chart is 65.47; it has again marked a new 14-period high which is bullish. However, it remains neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.
The pattern analysis shows that the markets formed their most immediate low point in December 2021; however, that had come with a strong bullish divergence of the RSI against the price. While the price had marked a sharply lower low, the RSI did not do so and it led to the emergence of a bullish divergence of the RSI. Since then, the NIFTY has seen a remarkable technical pullback of over 1500-odd points from that low point of 16410. In the process, it has also managed to crawl back above all its key moving averages.
The risk-on setup was evident as not only the banking and financial stocks outperformed, but the outperforming stocks also included metals. However, we will still continue to see the markets staying stable, but it is also likely to see wider participation when it comes to participation from the stocks. Apart from this, the present technical structure, if read along with the Options data indicates a possible consolidation for the markets. It is reiterated that shorts must be avoided and it would be prudent to stay invested in the relatively stronger stocks on a selective basis.
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)
