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Thursday Trade Setup: Weekly Options Data Show Capped Upsides; These Stocks Will Continue To See Action

After a day of a breather, the markets resumed its corrective move to end yet another day with a modest loss. Following a weaker handover than usual from the global trade setup, the Indian equities opened on a negative note. After opening negative, the NIFTY slipped further in the morning trade. The index, however, managed to recover from its morning low point to trade flat again near its previous close. The second half of the trade, though, saw a wave of profit-taking gripping the markets again which took the NIFTY to its fresh intraday lows. The index spent the last hour and trade in a capped move showed no major recovery. The headline index NIFTY finally ended with a modest cut of 104.55 points (+0.68%).

We have weekly options expiry coming up and the trend for the day will be heavily influenced by the weekly options expiry.  On Wednesday, the strikes of 15300 saw maximum Call writing followed by the 15200 level. This ensured that the maximum Call OI now stands at 15300. This maximum Call OI concentration was initially at 15500 at the beginning of this week; this gradually shifted to 15400 and now to 15300 levels. This means that the NIFTY will face resistance with each incremental upside. The maximum Put OI, however, continues to stay at 15000 levels. 

The markets are expected to see ranged moves between 15300-15000 levels unless there is any tactical shift of OI on either side. The volatility cooled off a bit with INDIAVIX coming off by 1.26% to 21.5050. Thursday will see the levels of 15260 and 15300 acting as resistance; the supports come in at 15130 and 15040 levels.

The daily RSI is 66.92; it has slipped below 70 from an overbought zone, and this is bearish. The RSI is neutral and does not show any divergence against the price. The daily MACD is still bullish and remains above its signal line. A black body emerged on the candles; apart from this, no other formation was noticed.

The pattern analysis shows that the NIFTY attempted to move past the rising trend line drawn from 14600 levels. The index has moved past this level; however, any slip below 15200 will take the NIFTY below this pattern resistance again.

All and all, the markets are showing all possible signs of fatigue at current levels. There are certain pockets like select midcaps, PSU Banks, and energy stocks seeing selective outperformance against the broader markets, and this phenomenon is likely to continue for some time. We reiterate approaching the markets with utmost caution and avoid chasing the high beta stocks that have run up too fast over the past quarter. There is an evident sector rotation happening and staying light while approaching the markets on a highly selective and cautious note 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)

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