While trading much on the anticipated lines, the NIFTY consolidated near the all-important 18000 levels and also continued showing strong internal strength as it ended the day on a positive note. Given the kind of trade setup that the NIFTY had inherited, the domestic markets opened on a highly resilient note. The NIFTY opened on a flat note and oscillated in a narrow range in the first hour of the trade. However, it slipped further in the negative by afternoon. The second half of the session saw the markets staged a remarkable recovery; the NIFTY rebounded over 150-points from the low point. The headline index finally ended at a new closing high with gains of 46 points (+0.26%).
As we approach the penultimate day of the expiry of the weekly options, the options data continues to offer interesting insights. The 17900 saw continued Put writing while the strike of 18000 saw some Call unwinding as well. This means that in the event of consolidation, the 17900 can well end up offering good supports. On the other side, it also appears that unless there are any major negatives or corrective moves to deal with, NIFTY stands a good chance of staging a breakout once again and moving past 18000 levels. INDIAVIX edged lower by 1.48% to 15.8475.
NIFTY may see a flat to a positive start to the day. Wednesday is likely to see the levels of 18020 and 18135 acting as immediate resistance points. The supports come in at 17935 and 17900 levels.
The Relative Strength Index (RSI) on the daily chart is 68.17; it continues showing a mild negative divergence against the price. The daily MACD is bearish and below the signal line. The narrowing slope of Histograms shows the possibility of this indicator showing a positive crossover in the coming days.
The markets stayed highly selective on the expected lines. Much on the expected lines the select banks, PSE stocks, and Auto stocks continued to improve their relative strength against the broader markets. A similar kind of show is expected from the markets through the rest of the week as well. As mentioned in the previous weekly note, there are no signs of any impending corrective move happening in the markets. Therefore, under the given technical setup, we recommend avoiding shorts completely. All new purchases should be kept highly stock/sector-specific in nature. We expect the majority of the sectors to improve their relative performance against the broader markets. 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)
