In a completely listless session, the Indian markets consolidated with a negative bias and ended the day with a modest loss. The markets saw a positive opening; it was in this early minute of the trade that the NIFTY marked its high point of the day. After staying briefly in the positive territory, the Index soon slipped inside the negative territory. The entire session was spent in a highly capped and defined range and the markets did not show any attempt to recover during the day. Following a session with saw gradual declines, the headline Index ended with a net loss of 41.50 points (-0.26%).
The technical setup that has developed over the past several days has marked the levels of 15900 as a potential top for the markets. The previous session saw heavy call writing since morning; and given the weekly options expiry day, the NIFTY settled below the 15700 levels as that point had the highest accumulation of the Call Open Interest. The volatility continued to fall at precariously low levels; INDIAVIX further declined by 1.57% to 12.8400. This level unarguably remains one of the lowest levels seen in the recent past.
Friday is likely to see a tepid opening to the start of the day. Flaring crude prices, strong US Dollar, etc., are likely to dampen the sentiments of the markets. NIFTY is likely to see the levels of 15720 and 15775 as immediate resistance points. The supports come in lower at 15600 and 15505 levels.
The RSI on the daily chart is 54.91; it made a fresh 14-period low which is bearish. RSI is however neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line.
A black candle emerged. The opening and the high point at the same level defines the weakness of the session and the directional consensus of the market participants behind it.
The pattern analysis shows that the level of 15900 has now become an intermediate top for the markets. So long NIFTY stays below this point, it will either continue to consolidate in a broad range or see corrective moves. No meaningful up moves are likely to occur so long as NIFTY is below this point.
All in all, taking the present technical setup into consideration, all up moves, if at all they occur, will present an excellent opportunity to exit from the current positions. Classical distribution is observed in the markets; weak market breadth confirms this. Also, given the prolonged time that the VIX has stayed at lower levels, there are heightened chances of volatility spiking in the near term. We recommend staying away completely from the high beta and economy-facing stocks. While maintaining an ultra-cautious approach, purchases should be kept moderate and limited to defensive stocks.
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)
