It was a day of positive consolidation for the stock market; the NIFTY opened higher on a positive note, maintained its gains throughout the day, and ended on a modestly positive note. The NIFTY opened above the 50-DMA levels but continued to resist the 17300 levels and the 100-DMA which presently stands at 17326. Although the markets continued to trade on a positive note, they still remained in the broad consolidation range and did not show any tangible breakout from the zone. While continuing to maintain its strength until the end of the session, the headline index ended the day with a net gain of 103.30 points (+0.60 %).
If the markets inherit a stable global trade setup on Wednesday, it may see some extension of the move. However, for any sustainable up move to start, NIFTY will have to open and keep its head above the 100-DMA level which stands at 17326. Unless taken out comprehensively, this level will continue to act as a resistance for the index on a closing basis. Going by the weekly options expiry data, even when a heavy put writing was seen at 17300, the maximum call OI still stands tall at 17500. This means that even if the buoyancy stays intact, the levels of 17500 still remain a formidable resistance for the markets in the immediate near term.
Volatility eased; INDIAVIX came off by 5.78% to 21.3025. Wednesday is expected to see the levels of 17365 and 17450 acting as probable resistance points; the supports come in at 17240 and 17130 levels.
The daily RSI is 56.93; it continues to stay neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line.
The pattern analysis shows that while the NIFTY has taken visible support multiple times at 200-DMA; it was resisting the 50-, and the 100-DMA which stand at 17326. With the highest call OI at 17500; the zone of 17350-17500 has become a stiff resistance area for the markets for the immediate near term. On the lower end, 17000 remains a strong area.
Presently, despite a buoyant close, the NIFTY still remains in this broad consolidation/trading range of 17000-17500 levels. Unless the NIFTY moves past 17500 or slips below 17000, it will continue to oscillate back and forth without any sustainable directional move. The opening of the NIFTY on Wednesday and its price behavior against the levels of 100-DMA will be crucial. If the NIFTY is not able to move past the 17350 level and stay above that, it will continue staying prone to profit taking bouts from higher levels. Even if there is an extension of the move on the higher side, it is strongly suggested to use that move in booking profits and taking some money off the table; it would not be wise to chase the up move until the level of 17500 is taken out convincingly.
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)
