In a typically weekly options expiry-dominated session, the markets traded in a defined range before ending the day with a minor gain. The markets saw themselves opening on a positive note as it marked its day’s high point in the early minutes of the trade. However, the markets pared its gains and slipped briefly in the negative. The rest of the session was spent with the NIFTY oscillating in a very narrow and defined range while the markets did not take any directional call. Some upside momentum was seen towards the end of the session; the index reached very near to the high point. It finally ended with a modest gain of 45.45 points (+0.25%).
There was significant put writing seen at 18200 levels; this ensured that the NIFTY kept its head above this point throughout the day. The monthly options data shows the NIFTY staying between 18000-18500 for the remainder of this month. As we step into the next session, we have the technical setup offering somewhat mixed signals on the charts. The technical pullback that began after the NIFTY tested the lows of 16400 has visibly overextended itself and may be prone to some consolidation. On the other hand, the F&O data remains strong and the broader technical setup stays buoyant. So long as the NIFTY is able to stay above 18100-18200 levels, the upward momentum will stay intact.
Friday is likely to see the levels of 18300 and 18375 as immediate resistance points. The supports come in at 18160 and 18050 levels. The trading range is expected to stay a little wider than usual.
The Relative Strength Index (RSI) on the daily chart is 69.30. It has made a new 14-period high which is bullish. The RSI is neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line.
All in all, the weakness in the US Dollar index is aiding a kind of risk-on setup that we are presently witnessing in the markets. The current present technical pullback has seen the NIFTY rebounding nearly 1600+ points from the lows witnessed in December. The present move looks a bit overextended on the charts and some consolidation cannot be ruled out. However, the technical setup looks highly buoyant and the consolidation phase, if any, should be used to make quality and stock-specific purchases. While guarding profits vigilantly at higher levels, a cautiously positive outlook 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)
