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Outlook For Wednesday: NIFTY Stable Within The Rising Channel; Supports Shift Higher To This Level

The equity markets gained for the fourth day in a row as the liquidity continued to drive the momentum on the higher side. The markets saw an all-round secular performance which resulted into all the sectors ending with gains. Amongst the all, the financial services, banks and realty saw some stronger performance. The NIFTY saw itself opening on a quiet note. After an initial slip, the Index stayed in the upward rising trajectory for the rest of the day. The last hour of the trade remained particularly stronger and the headline index ended the day with gains of 159.80 points (+1.55%).
 


We enter the penultimate day of the expiry of the current derivative series. The session will remain dominated with the rollover centric activity. The weekly options data show the 10500 strikes having a maximum concentration of Call OI; this level may act as resistance going ahead. The broader momentum is absolutely stable and the 100-DMA, which presently stands at 10057 will continue acting as support for the near term for the NIFTY.

 
Wednesday is likely to see a stable start to the day. The levels of 10500 and 10565 will act as immediate resistance points. The supports come in lower at 10405 and 10340 levels.
 
The Relative Strength Index (RSI) on the daily chart is 68.71; it shows a bearish divergence against the price. The bearish divergence has resulted out of the RSI not forming a fresh 14-period high while the NIFTY did mark a 14-period high. The daily MACD is bullish and it trades above its signal line. A white body appeared on the candles. This indicates a unanimous move on the upside during the day.  
 
The pattern analysis shows the NIFTY comfortably placed in the upward rising channel. Presently, the index trades above its 50- and 100-DMA. Going ahead, in the event of any corrective move, the 100-DMA will be expected to act as support.
 
The present momentum is still purely liquidity driven, and it is a part of the global risk-on setup that is taking place. If the present force on the upside continues, the NIFTY might end up piling some more gains. However, the NIFTY stays in such a technical setup that it warrants remaining vigilant at each higher level. We recommend avoid creating heavy positions on either side and stay light on over all exposure while moving along with the momentum in a cautious manner.

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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