In a session that remained highly influenced and affected by the weekly options expiry, the equity markets closed on a flat note after coming off over 290-points from their high point of the day. The markets saw a strong start; it grew stronger as the day progressed and marked its day’s high in the morning session. However, the markets failed to capitalize on the morning gains. Gradually, the NIFTY gave up all its gains by later afternoon to dip slightly in the negative zone. In the end, the headline index ended up closing on a flat note while gaining negligible 5.05 points (+0.03%).
The move that was seen in the previous session looked grossly affected and driven by weekly options expiry. The NIFTY current month futures have continued adding to its OI; it added fresh OI of over 2.07 lakh shares or 1.93% in net Open Interest. Taking the previous two sessions together, the NIFTY has added massive OI along with the decline from the higher levels. This indicates a pile-up of large short positions in the system. From a technical perspective, the NIFTY has dragged its resistance point lower over the past couple of days. The zone of 16800-16850 stays an important resistance area for the markets in the immediate near term.
Friday may see the markets trying a stable start once again; the levels of 16780 and 16850 may act as immediate resistance points. The supports come in at 16600 and 16530 levels.
The Relative Strength Index (RSI) on the daily chart is 39.47; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
An inside bar occurred on the charts which means the current bar has a lower top but a higher bottom. It also translates into a Harami pattern on the candles where the present body is engulfed by the prior body of the candle.
All in all, the present technical setup warrants that we keep the analysis for the next trading day on similar lines. Given the kind of shorts that the NIFTY has added over the past couple of days, it has kept a lot of room to find support at lower or current levels. It is strongly suggested that one must refrain from adding fresh shorts and continue using each downside to pick good quality stocks. 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)
