The mid-day scare proved to be a dampener to a market that had otherwise staged a remarkable resumption of the up move following two days of really weak trade. The markets saw themselves opening on on a flat note; however, it grew only stronger in the morning session. While the NIFTY marked its high point of the day the NIFTY was well past the 17300-level. However, the markets were gripped with uncertainty once again given the Omicron fears; the NIFTY shed all of its grains to slip in the negative territory. It did spend some time in the positive zone again, but it ended the day on a negative note losing 70.75 points (-0.41%).
Although the NIFTY came off over 390-points from the high point of the day, the market breadth remained stable and not-so-weak; the NIFTY Index saw 28 stocks declining against 22 stocks advancing. We enter the penultimate day of expiry of the weekly options; the options data show 17000 continuing to hold maximum Put Open Interest. This means that if the NIFTY opens above 17000 and stays above this point, we once again have fair chances of short-covering led rally. It is also important to note that significant number of fresh shorts have been added. Along with Tuesday’s decline, NIFTY December futures also added over 4.04 lakh shares or 3.70% in net Open Interest.
The opening on Wednesday will be crucial; the levels of 17090 and 17165 will act as probable resistance points. The supports come in at 16900 and 16830 levels.
The Relative Strength Index (RSI) on the daily chart is 31; it shows a bullish divergence against the price. The daily MACD is bearish and stays below the signal line. A candle with a long upper shadow emerged; generally, such candles are bearish but given the fact that this one has occurred near the support levels following a decline, the current formation/candle should be best ignored.
All in all, the uncertainty created by the impact of the Omicron variant is keeping the situation fluid and it is also infusing volatility in the markets. Given the present technical setup, even if the downtrend persists, it should not be without some technical pullback. The NIFTY stays oversold on short-term parameters. It is recommended to stay away from heavily leveraged exposures. Looking at the amount of shorts that exist, it is also recommended that shorts should be avoided. All exposures should be kept in modest quantities and they should be kept limited to low beta stocks and with those stocks that have a strong relative strength against the markets. Continuation of cautious 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)
