Gemstone Equity Research & Advisory Services

Outlook For Wednesday: NIFTY Shifts Supports Higher; Focus Moves Now On Weekly Options Data

The markets continued with its strong up move and ended the day with strong gains while confirming its breakout from the all important 200-DMA. Though the markets registered strong gains on a closing basis, the session remained quite range bound after a gap up opening. In other way, the markets were able to sustain the opening gains and build on it further during the day. Despite capped moves throughout the day, the headline Index ended the day with a decent gain of 140.05 points (+1.27%).

The present setup of the daily charts shows NIFTY placed in a strong spot, more so after having broken out above the 200-DMA which presently stands at 10865. By breaking out, the NIFTY has drastically raised its support level to the 200-DMA. Given the options expiry that will play out over the next two days, important levels to watch would be 11200 which continues to hold the maximum CALL OI concentration. On the lower side, the levels of 11000 and 11100 have seen large amount of call writing as well. 

For the immediate short-term, the levels of 11200 would be, therefore, important to watch. If the NIFTY is able to move past and stay above 11200, then it will open up further upsides for the Index. However, as of now, this level holds the maximum OI and if this does not budge, then this level might act as a short-term resistance.

The levels of 11200 and 11265 will act as over head resistance points on Wednesday. The supports come in at 11100 and 11035.

The Relative Strength Index (RSI) on the daily chart is 7272. It is neutral and does not show any divergence against the price. The RSI, being above 70, is mildly overbought at present. The daily MACD is bullish; it now trades above its signal line.

Another rising window emerged on candles. This is a second consecutive gap which depicts a strong momentum and strength of the moves. This generally means continuation of the uptrend and it is considered a bullish structure on the charts.

All in all, if the maximum Call OI concentration which is presently at 11200 shifts, we may see higher levels opening up on NIFTY. Otherwise, we will see upsides staying capped. On the other hand, the high amount of call writing at 11000 and 11100 levels will make sure we do not have any significant down moves as well unless some major tactical shift occurs. In view of the present technical setup, we may see the NIFTY continuing to make ranged movements. We reiterate continuing approaching the markets in a very stock specific manner while guarding the profits at higher levels.

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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