Very much on the anticipated lines, the NIFTY made a strong breakout from the broad 15700-16400 trading range that it had formed over the past couple of weeks. In the previous technical note, it was mentioned that if the NIFTY is able to move past and sustain above 16400, it may see a strong move on the higher side. The markets saw a gap up opening on Monday; it saw the NIFTY opening well above 16400 levels. The markets remained their gains throughout and did now show any inclination to correct. The headline index closed while posting strong gains of 308.95 points (+1.89%).
Monday’s move is very important from a technical perspective. The NIFTY has dragged its support levels higher to 16400. In the event of any consolidation or a move on the downside, the level of 16400 is expected to lend support. The weekly options data shows that the 16500 levels saw massive Put writing to the tune of 4.6 million shares followed by 14600 levels. This means that the 16400-16500 zone is expected to lend strong support to NIFTY in the immediate short term. The maximum Call OI is at 17000; this also means that given the supportive global cues, the markets have got steam left in themselves which can push them higher towards 17000 levels.
If there are no overnight negative global cues to inherit, Tuesday may see a stable start to the day. The NIFTY is likely to find resistance at 16700 and 16795 levels. The supports come in at 16580 and 16500 levels.
The Relative Strength Index (RSI) stands at 54.11; it has marked a new 14-period high which is bullish. RSI also stays neutral against the price. The daily MACD is bullish and stays above the signal line.
A rising window emerged on the candles again. This is a breakaway gap; the most likely resolution of such patterns is usually in the direction of the trend subject to confirmation.
There are strong possibilities that the markets extend their move; it is strongly suggested that in the event of any consolidation or minor corrective declines, one should strictly refrain from shorting the markets. In fact, such opportunities must be utilized to create good entry points in relatively stronger stocks. We will continue seeing the pockets like Realty, Consumption, IT, PSE, etc., get stronger in their relative performance. Overall, a 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)
