The Indian equity markets refused to take a breather; the equities continued to surge as the NIFTY ended yet another day on a strong note. The markets saw a positive start to the day; the index opened higher and got stronger as the day progressed. The NIFTY moved past the 18200 levels in the afternoon; however, the index did come off its high point during the day. The strength returned to the markets again which took the index to the new high point of the day. The higher levels were maintained and the headline index finally ended the day with a decent gain of 156.60 points (+0.87%).
We will have weekly options expiry coming up on Thursday. The options data present a buoyant picture of the markets. If we look at the options data, the previous session saw high call unwinding at 18000 and 18100 levels. At the same time, the strikes of 18100 and 18200 saw a high amount of Put writing taking place. This means that the market participants are not expecting any major downsides in the market as per these figures, which are, of course, subject to change if any major negative has to be dealt with. Also, it is important to note that the maximum Call OI has shifted higher to 18500 levels; in the process, it has opened up some more room on the upside.
Thursday is likely to see the levels of 18290 and 18335 acting as important resistance levels. The supports come in at 18150 and 18050. For any uptrend to extend itself, it would be crucial for the NIFTY to keep its head above the 18150-18200 zone.
The Relative Strength Index (RSI) on the daily chart is 68.52; it has marked a new 14-period high which is bullish. The RSI is neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.
A Rising Window occurred on the Candles. This results out of a gap on the upside. Such formations usually resolve in the continuation of the uptrend. However, this will need confirmation on the next bar on the charts.
The pattern analysis shows that the NIFTY has tested and moved above the “neckline” of the bearish Head and Shoulders formation which it had created and violated in the process. The NIFTY also continues to track the upper Bollinger bands that are widening in their structure.
The overall technical structure shows that the markets have a solid and strong underlying current despite the fact that they may be in some consolidation. This would mean that even if there is expiry-influenced consolidation, the downsides will continue to stay limited. It is expected that a risk-on flavor is likely to continue; we will see Metals, IT, Financials, and select Pharma stocks may continue to relatively outperforming. It is also expected that the broader markets will continue doing better. In the event of any consolidation which may be just a ranged one, it is recommended to avoid shorts and use such opportunities to make select purchases. 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)
