It was mentioned in the previous technical note that if the technical pullback continues, then the NIFTY has some room on the upside which can enable the Index to test 16200 levels. The session on Wednesday turned out to be much better than expected; the NIFTY opened on a positive note but stayed a bit shaky in the morning trade while maintaining modest gains. It was in the late morning trade and onwards that the markets started to gather strength. The NIFTY inched higher and kept marking gradual highs until the end of the session. Despite a slight coming off from the high point, the headline index managed to post strong gains of 331.90 points (+2.07%).
The market gains were attributed to strong technical reasons and also some absence of a fresh set of negatives on the geopolitical front. In any case, the NIFTY has managed to penetrate the trend line pattern resistance near 16100-16200 levels. In other words, this was the support that the NIFTY had violated on its way down; it had now become resistance. This would mean that the NIFTY has chances of the technical pullback getting extended if it is able to keep its head above 16150-16200 levels over the coming days. Volatility cooled off a bit; INDIAVIX came off by 3.91% to 27.4675.
Thursday has weekly options expiry coming up; the levels of 16435 and 16490 are likely to act as immediate resistance points. The supports come in at 16280 and 16175 levels.
The Relative Strength Index (RSI) on the daily chart is 42.34; it is neutral and does not show any divergence against the price. The RSI is however seen breaking out from a falling trend line resistance. The daily MACD is bearish and stays below the signal line.
A strong white candle appeared on the charts; it reflected a strong directional consensus on the upside.
As indicated by the weekly options data, the markets still have some more room on the upside. The weekly options expiry is likely to influence the trade; the highest Call OI stays concentrated at 16500. Unless there is no major tactical change, the level of 16500 is likely to act as resistance if the technical pullback gets extended. The highest Put OI stands at 16000. There are possibilities that the markets stay in a defined range with a bullish undertone. The cooling off in the crude oil prices may have some respite on the badly beaten-down stocks like financials, autos, paints, etc. It would be prudent to avoid pockets like Oil, metals, etc., and look for opportunities in quality stocks if the markets offer any move on the downside. A cautious but 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)
