The Indian equity markets traded precisely on the expected lines. Following five days of corrective action, the markets showed a technical pullback and ended the day with gains. After opening on a positive note, the NIFTY grew stronger in the morning trade. However, it pared its gains by afternoon to trade flat once again. However, the second half of the session saw a strong recovery from the lower levels. The NIFTY pulled back over 175-odd points from the low of the day. The markets showed great strength, particularly in the last hour of the session. The headline index ended with a net gain of 143 points (+0.79%).
The weekly options data shows bullish indications. The 18200 PUT was one of the most active trikes, it saw massive writing and the addition of Open Interest. This means that market participants do not expect the Index to slip below this level by expiry. On the other hand, while supporting this theory, a large number of Call unwinding also happened at all strikes between 18000 and 18400 levels. If the NIFTY has to continue with its up move, it would be crucial for it to stay above 18150-18200 zones.
Volatility dipped; INDIAVIX slipped by 4.87% to 16.7525. The levels of 18325 and 18400 are likely to act as resistance levels; the supports come in at 18150 and 18080 levels. The trading range is likely to stay defined and volatility may stay at lower levels.
The Relative Strength Index (RSI) on the daily chart is 64.60; it stays neutral and does not show any divergence against the price. The daily MACD is bearish and remains below the signal line.
A white body emerged on the candles. Apart from this, no other formations were noticed on the charts.
The pattern analysis shows a wide consolidation range of 18000-18600 very well defined on the charts. The lower edge of this zone is validated with the NIFTY taking supports and bouncing off from the 18000-18150 area.
All in all, we will continue to see incremental up moves happening in the markets if the NIFTY stays above 18200 levels. However, the way the lower edge of 18000-18150 is defined, the zone of 18500-18600 also remains a well-defined resistance area for the markets. The way shorting in the markets is not at all advised in the present technical setup, it is also recommended to keep purchases highly selective while avoiding leveraged exposures on either side. If the markets approach higher levels, the higher levels should be utilized to protect profits unless a comprehensive breakout above 18500 takes place. Overall, 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)
