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Outlook For Wednesday: NIFTY At A Fresh High; Likely To Stay Ranged If No Negative Overnight Cues Exist

While keeping up with the daily routine of marking new highs every day, the markets once again staged a remarkable turnaround during the day to close at a yet another lifetime high. Following an overnight weak closing of the US markets, the Indian markets started on a backfoot as it saw a modestly gap down opening. After opening negative, the Index slipped a bit more to form the low point of the day in the morning. However, from there on, the NIFTY started to recover and while counting for a minor blip in the afternoon, it went on to rebound over 150-points from the intraday low. The headline index finally ended the day with a net gain of 66.60 points (+0.47%).

The analysis for Wednesday stays much on the similar lines; the session is likely to be governed by the weekly options data. The levels of 14100 saw maximum amount of PUT writing during the day. However, the strike of 14000 continues to hold highest PUT OI despite a massive attempt of the markets to drag supports a bit higher. The 14300 strike saw over 1 million Calls being written; the maximum Call OI stands at 14500 as of today. We are set to see a trending markets on either side within a defined range in the coming session. The volatility continued to rise as INDIAVIX inched higher by another 2.14% to 20.4300.

Wednesday is likely to see the levels of 14260 and 14295 acting as resistance points. The supports come in at 14110 and 14000 levels.

The Relative Strength Index (RSI) on the daily chart is 76.83; it stays overbought while showing a mild negative divergence against the price. The daily MACD is bullish as it trades above the signal line. A bullish engulfing candle has occurred. However, since it has occurred near the high point, it should be ignored as it is irrelevant given the present technical setup.

As the markets have ended near its high point, the possibilities of some incremental move cannot be ruled out if there are no negative overnight cues to deal with. The strong undercurrent is reflected in the FO data as all the up moves are coming with decent additions in Net Open interest and this shows creation of fresh longs with every rise. However, this does not undermine the overextended texture of the markets, and this keeps NIFTY vulnerable to profit taking bouts at current or higher levels. We recommend avoiding shorts and continuing to follow the momentum with a highly cautious and stock-specific approach.

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)

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