In yet another expected move, the NIFTY staged a technical pullback once again; it opened with a gap up and maintained its gains after an initial blip through the day while it closed on a positive note. The NIFTY opened on a positive note; despite a positive start, the markets pared nearly all their gains in the first hour of the session. However, the markets reversed their trajectory. It kept piling up incremental gains through the rest of the session and moved past the crucial resistance point of 17200. Though the NIFTY did come off a bit from the high point, the headline index closed with a net gain of 206.65 points (+1.21%).
The monthly derivatives expiry was seen getting done on a strong note; the strikes of 17200 saw massive Put writing done through the session. This ensured that the NIFTY stayed and settled above the 17200 levels. However, the maximum Call OI stayed constant at 17300; it saw the NIFTY settling below this level. The next week’s weekly options data continues to show the zone of 17000-17500 as a probable trading range with sustainable directional bias getting established with either of the levels getting taken out. The NIFTY has again closed near the 200-DMA which presently stands at 17219; this level has to be watched closely as NIFTY will have to move past this point if it has to extend its pullback.
Friday is likely to see a stable start to the day. The levels of 17350 and 17465 will act as probable resistance points; the supports come in at 17180 and 17040.
The Relative Strength Index (RSI) on the daily chart is 49.55; it continues to stay neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line. A spinning top emerged on the candles; such a candle occurs when there is little difference between the open and the close levels.
The pattern analysis shows that the NIFTY has created a congestion zone between 17000-17500 levels; all three key moving averages are within this zone in close proximity to each other.
All in all, despite the strong moves on either side, no move, up or down, should be taken for granted or chased in any particular direction. The markets will remain prone to volatile moves on both sides so long as it is in the congestion zone of 17000-17500. For any sustainable extension of the up move, it would also be additionally important for the NIFTY to move past the 200-DMA and keep its head above that point. It is recommended to continue maintaining a defensive approach. All profits must be protected vigilantly at higher levels.
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)
