It was observed in the previous technical note that the decline in Wednesday’s session has come along with a sharp decline of NIFTY futures OI. This indicated long unwinding and can have bearish implications. The weekly options expiry on Thursday happened on a very weak note as the headline index opened lower, got weaker, and eventually ended with a loss. After the negative opening of the markets, the NIFTY traded in a range and in a defined trajectory. The early afternoon trade saw the NIFTY recovering from lower levels. At one point in time, the index had recovered nearly all its losses, but the recovery failed to sustain itself. The NIFTY finally ended with a net loss of 168.10 points (-0.94%).
The weekly options expiry had a bearish undertone throughout the day. The strikes of 17650 and 17700 saw massive call writing activity. This prevented the NIFTY to settle above the 17650 levels. The monthly call continued to see heavy writing at 17600 and 17500 levels. This indicates that for this month, NIFTY is unlikely to violate the 17500 levels. The weakness remained across the board as all sector indexes except NIFTY Realty and Pharma ended in the red. NIFTY Pharma gained 0.41% while Realty barely managed to stay in the positive territory by 0.03%. All other sectors recorded moderate losses.
Friday may see the markets trying to regain some stability. The NIFTY is likely to see the levels of 17700 and 17835 acting as potential resistance points. The supports come in at 17700 and 17610 levels. The trading range for the markets is likely to stay wider than usual.
The Relative Strength Index (RSI) on the daily chart is 57.36; it continues to stay neutral and does not show any divergence against the price. The daily MACD stays bullish and above the signal line.
The current technical setup makes two things very clear; one is that the NIFTY may attempt to find some stability while attempting a technical rebound, and the other thing that becomes evident is that the index is unlikely to move above 18000 too soon. The technical structure of the charts makes it pretty clear that the markets are once again staring at a broad-ranged consolidation from the current levels. The levels of 17500 become important again; this was the prior resistance that the NIFTY took out while moving higher. This point is expected to act as a support in either case.
It is recommended to once again stay highly selective in selecting stocks. While navigating the current phase of the markets, it would make more prudent sense to stay with defensive and low beta stocks while keeping leverage at lower 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)
