After inheriting a buoyant global trade setup, the Indian equity markets saw a strong and a gap-up opening in the morning. The NIFTY saw itself opening well above 16700 levels; however, the markets formed their high point of the day in the early minutes of the trade. The Index maintained its gains in the first half as it traded sideways while defending the bulk of its gains. It was in the afternoon that the NIFTY gave up some more of its gains on the back of profit-taking at higher levels. However, some recovery was seen in the last hour of the trade; the headline index managed to end on a strong note posting net gains of 249.55 points (+1.53%).
The markets also navigated the weekly options expiry that stayed on the expected lines. The high Call writing at 16800 and 16700 levels did not allow the markets to move higher; in the same breath, the maximum Put OI at 16500 also prevented the NIFTY from slipping below that point. From a technical perspective, the high point for Thursday was very near to the lower edge of the bearish descending triangle that the NIFTY had broken down from; this level falls near 16800. Moving higher, the index has its 200-DMA which presently stands at 16959. All this makes the zone of 16800-16950 a stiff resistance zone in the near term.
Volatility declined; INDIAVIX came off by 6.86% to 25.5825. Friday is likely to see some consolidation happening with the levels of 16680 and 16750 acting as strong resistance points. The supports come in at 16500 and 16380 levels. The trading range for the day may stay a bit wider than usual.
The RSI on the daily chart is 45.71; it has made a fresh 14-period high which is bullish. It also shows a bullish divergence against the price and appears to have broken out from a falling trend line pattern resistance. The daily MACD is bearish and trades below the signal line.
All in all, the markets are likely to consolidate at higher levels with the NIFTY finding strong resistance in the 16800-16950 zone. It is strongly recommended to protect profits at higher levels. Along with this, even if there are any downside moves, creating shorts may be avoided at current levels. It is reiterated that all down moves should be utilized to pick up quality stocks at lower levels. Profits too should be protected 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)
