The stage was set for a smart gap-up opening for the markets following strong global cues on Friday. However, in between that, Putin heightened rhetoric and his fresh nuclear threat once again hurt the sentiments of the equity markets on Monday. This led to a negative and gap-down opening for the markets. The NIFTY opened lower but soon marked its intraday low point in the first hour of the trade. After that, it kept gradually recovering from the lows and crawled back inside the positive territory by afternoon. It extended its gains and ended up recovering over 400-points from its morning low point. The headline index ended with a net gain of 135.50 points (+0.81%).
The markets will open after a gap of one day; Tuesday was a trading holiday on the account of Mahashivratri. NIFTY will open and adjust to the overnight trading cues which are expected to be highly tentative. The F&O data suggest that the 400-point recovery that was witnessed in the previous session was supported by the addition of fresh longs. The NIFTY March futures added over 6.33 lakh shares or 5.99% in net open Interest. The weekly options data also suggest the highest Call OI accumulation at 17000 levels; the 200-DMA also stands at 16913. This means that if the markets extend their up move, they have room on the upside; in any case, the zone of 16900-17000 is the most immediate resistance zone that the NIFTY will have to navigate in the near term.
Wednesday is likely to see the levels of 17860 and 17985 acting as resistance points. The supports come in at 16710 and 16580 levels.
The Relative Strength Index (RSI) on the daily chart is 42.40; it is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
A strong white candle appeared. It showed the directional consensus of the market participants. It also shows that the prices closed way higher than the levels at which it opened.
All in all, it is beyond doubt that the geopolitical tensions between Ukraine and Russia continue to remain fluid. Although the markets are not expecting any further escalations than what it is now as seen from the F&O data, the fluid situation can go either way. It is best not only to avoid shorts but also to keep fresh purchases limited and in modest quantities. If the NIFTY extends its up move, the index’s testing of the 200-DMA cannot be ruled out. In any case, a sustainable up move will not happen unless the NIFTY moves past 17000 levels comprehensively. It is reiterated to approach the markets cautiously; in the event of an extension of the up move, the high beta names will do better. Some defensive plays in the consumption and IT space also cannot be ruled out. A cautious and 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)
