In the previous technical note, it was mentioned that the level of 18000 is set to act as an inflection point for the NIFTY. In line with this analysis, the markets opened higher above the 18000-mark, struggled for the most part of the session to say above it but eventually ended below this point. After opening positive, the NIFTY soon slipped into the negative zone. It stays above the 18000-levels but traded with capped losses. A spurt in the afternoon took the NIFTY back in the positive zone. However, this recovery was not sustained, and the NIFTY soon slipped into negative territory again. It slipped below the 18000 level, and eventually ended with a net loss of 96 points (-0.53%).
The strikes of 18000, 18200, and 18400 saw strong call writing throughout the day. For the major portion of the session, the level of 18000 saw the highest call and put writing activity; the NIFTY finally gave up this level to close below this point. Now 18000 strikes hold the highest Call OI accumulation for this week’s options expiry. As of now, we can fairly conclude that unless the level of 18000 is taken out again and that too convincingly, we will find the markets resisting this level for the next couple of days. Volatility inched higher; INDIAVIX moved up by 3.23% to 18.4875.
Wednesday is likely to see the levels of 18000 and 18065 acting as potential resistance points. The supports come in at 17880 and 17810.
The Relative Strength Index (RSI) on the daily chart is 65.67; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and remains above the signal line. Apart from a black body that emerged, no other formations were seen on the candles.
The pattern analysis shows that NIFTY has taken out the pattern resistance at 17500; in the process, it has dragged its support levels higher. The most immediate resistance for the NIFTY is the 18000-18100 area; so long as the index is below this point, the markets will remain under ranged consolidation again.
The market breadth was showing a tentative approach; it remained equally divided as 25 stocks out of 50 in NIFTY advanced, 24 declined, while 1 remained unchanged. The market breadth needs to be much stronger for any sustainable up move to happen. In all probability, we are staring at a day or two of some consolidation again. So long as the NIFTY is below the 18000-18100 zone, it is strongly recommended to protect profits with each up move as the markets remain prone to defined consolidation and profit taking bouts at higher levels.
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)
