In the previous technical note, it was mentioned that although the NIFTY had violated the 200-DMA and had dragged its supports down, a strong technical pullback cannot be ruled out. Keeping in line with this analysis, the NIFTY showed a strong technical pullback and ended the day on a strong note. The Index opened higher; it maintained its gains and got stronger towards the end of the session to close near the high point of the day. The headline index closed with a net gain of 246.85 points (+1.46%).
From the technical perspective, the NIFTY has respected the pattern support area of 16800-16900 zones; at the same time, the technical pullback has seen the NIFTY halting its move at 200 DMA which presently stands at 17206. NIFTY now stands at a crucial juncture; moving past the 200-DMA and sustaining above this point on a closing basis would be very important for the NIFTY. If it fails to do so, then this level will stay as resistance on a closing basis, and markets, in general, will continue to stay vulnerable near this point.
The weekly options data show high Put writing happening between 17000 and 17200 levels; the highest Call OI stands at 17500 levels for this weekly/monthly options expiry. Wednesday is likely to see the levels of 17260 and 17350 acting as probable resistance points. The supports come in at 17110 and 17030 levels.
The Relative Strength Index (RSI) on the daily chart is 48.25; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. A rising window emerged on the candles as a result of a gap-up opening. Usually, such patterns get resolved in the direction of the move, a confirmation should be looked at as the markets have closed near a key resistance point.
All in all, the markets are within a defined trading range of 17000-17500; all three key moving averages of 50-, 100-, and 200-DMA fall within close proximity to each other. Unless the NIFTY takes out 17500 comprehensively on the upside or if it slips below 17000 meaningfully, it will not have any sustainable directional bias in the move. In the given technical setup, it is reiterated to continue staying highly stock specific. Rather than getting carried away by the up move, one must continue protecting profits at higher levels while staying light on positions.
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)
