In a predominantly weak day of trade on Friday, the Indian equities continued to grossly underperform the global markets as it ended the day with a deep cut. Following a negative start to the day, the markets remained in a secular downtrend and under consistent selling pressure until afternoon. The second half of the session saw some mild attempts to recover from the lows which got sold off as well. However, the NIFTY was able to defend it lows but in the same breath, it did not see any recovery as well. The headline index finally ended the day with a net loss of 263.20 points (-1.53%).
The current weekly options data shows maximum Put OI at 17000 levels; however, not only this is subject to change but the very same data also shows consistent Call writing being done between 17200-17300 levels. This means that NIFTY has a tricky path to navigate unless it moves past the 17300 levels. Not only that, it will have to keep its head above 17000 to avoid continued weakness on the charts. If not, then it will see itself violating a small pattern support trend line. The market breadth remains weak; this is something that will need to improve if the NIFTY has to stay in consolidation and avoid weakness.
Volatility increased on Friday; the INDIAVIX rose by 2.78% to 16.3375. Monday is likely to see the levels of 17085 and 17200 acting as important resistance levels. The supports come in at 16900 and 16810 levels.
The Relative Strength Index (RSI) on the daily chart is 38.58; it continues to show a mild bullish divergence. NIFTY marked a new 14-period low; the RSI did not, and this led to a mild bullish divergence of RSI against the price. The daily MACD is bullish and stays above the signal line. A large black body emerged. It emerged near the resistance points of 100-, and 20-Week MA which are at 17316 and 17271 respectively. This has highlighted the importance of this zone as an important resistance area.
All in all the F&O data does not give a clear indication; however, it does show some minor addition of shorts in the system. This is evident that along with the decline of Friday, the NIFTY current month futures have added 98,500 shares or 0.91% in net Open Interest. This is not a big figure, but it certainly provides a minor hint on the addition of shorts. Overall, the NIFTY has failed to take any directional call while it stayed in the 17000-17500 area. For any major resumption of the up move, moving past 17300 is crucial; on the other hand, defending 17000 is also equally important for the markets.
Over the coming days, the zone of 16750-17000 will be a crucial zone for the NIFTY to defend. In the present technical setup, it is strongly recommended to continue avoiding major exposures. All exposures should be kept modest; all downsides, if any, should be used to make very select purchases. While keeping exposures at very modest levels, a selective approach 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)
