Extending its up move for the third day in a row, the equity markets continued to inch higher as they ended yet another day with gains. The NIFTY opened on a higher note but soon slipped in the red in the first hour of the trade. However, a sharp up move followed which took the NIFTY to its intraday high in the afternoon. These gains were maintained as the index spent the second half of the session in a sideways trajectory. While maintaining its levels, the headline index ended the day with a net gain of 142.05 points (+0.81%).
The markets had two things to navigate; the weekly options expiry and the RBI monetary policy. There was a large amount of Put writing done at 17600 to the tune of 7.60 million; this made sure that the NIFTY keeps its head above this point as it settled. The RBI policy also was welcomed positively by the markets. The RBI kept all its key rates unchanged and the policy turned out to be more dovish and accommodative than expected. Given the next week’s options data, the levels of 17600 will act as an inflection point as it holds the highest Put and Call OI accumulation; the second-highest call OI stands at 18000. Volatility dropped; INDIAVIX came off by 4.55% to 17.7100.
Friday is expected to see the levels of 17690 and 17740 acting as potential resistance points. The supports come in at 17665 and 17580 levels.
The Relative Strength Index stands at 51.80; it continues to remain neutral against the price. The daily MACD is bearish and below the signal line. A small white body emerged on the candles. Apart from this, no major formations were observed on the charts.
The pattern analysis shows that the NIFTY has validated the confluence area of two trend line pattern supports that exist near 17000 by rebounding from there. Presently, it has halted its up move at the short-term 20-DMA which stands at 17610. The 100-DMA is also in close proximity at 17643.
The current technical structure makes the zone of 17600-17650 very crucial for the NIFTY. For any further extension of the move on the upside, NIFTY will have to convincingly move past this zone. If not, then the index will get vulnerable to some ranged consolidation once again. The PSU bank stocks accompanied by select private banks and other financial services stocks may see some traction. Along with these groups, the PSE stocks and select stocks from the Oil and Gas space and Auto may also remain relatively strong. It is recommended to avoid shorts and stay highly selective while protecting profits at higher levels.
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)
