It was a classic day of consolidation for the equity markets as the NIFTY took the breather, consolidated its gains, and ended the day with a modest gain. The markets saw a strong start to the day. After opening on a positive note, the NIFTY surged higher to mark the high point of the day in the morning session. A corrective move followed which saw the markets paring all the gains to slip in the negative. However, the remainder of the session saw some recovery from the lower levels. The headline index NIFTY ended the day with a modest gain of 66.80 points (+0.38%).
The past two days have seen the NIFTY taking some breather and consolidating following a strong 1500-point technical pullback from the December lows. As we step into a new week, there are higher chances that this consolidation may continue; in fact, this would be healthy for the markets. The options data show continued and steadfast existence of maximum Call OI at 18000; this makes this point the important near-term resistance for the index. Unless the levels of 18000 are taken out convincingly, no runaway move is likely to happen. Downsides too, if any, are expected to be limited.
Monday is likely to see a stable start to the day; the levels of 17865 and 17930 are expected to act as resistance points. The supports come in at 17730 and 17650 levels. The markets are likely to stay in a broad but defined range.
The Relative Strength Index (RSI) on the daily chart is 61.05; it is neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line. A Spinning Top emerged on the candles. This is a kind of candle where there is a little difference between the open and the close levels of the session. This denotes the indecisive behavior of the market participants.
All in all, there are greater chances of the NIFTY staying under a broadly defined consolidation. In the event of any continued up move, the levels of 18000 will pose stiff resistance. No runaway up move shall happen until the NIFTY breaches this level convincingly. The analysis for the coming session stays on similar lines; we are likely to see sectors like Metals, IT, Pharma, and select stock-specific outperformance from the broader space. In the event of any downside that may happen due to the possibility of consolidation, all such opportunities should be used to make select purchases. 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)
