The markets had a buoyant but somewhat volatile session where it managed to end with a decent gain. However, the session remained much on the expected lines. It was mentioned in the previous technical note that the opening of the markets above the 17000 levels may lead to heavy short covering. The markets opened well above this point following a gap up and managed to stay well above the 17000 points throughout the day. In the afternoon, the Index did pare some of its gains but the last hour and a half saw them getting recouped. The headline index ended with a net gain of 183.70 points (+1.08%).
From a technical perspective, the most important development was that the NIFTY has managed to defend the 100-DMA as a support on a closing basis. We have weekly options expiry coming up; the weekly options data show interesting insights. There was a heavy unwinding of calls seen at 17300 levels. Call writing was seen at 17500; this strike holds maximum Call OI as of today. On the Put side, the 17000 shows the highest accumulation of Put OI. This leads to the interpretation that so long as the NIFTY keeps its head above the 17000 levels, we can expect the extension of the current technical pullback on the upside. The volatility dropped; INDIAVIX came off by 8.12% to 19.4475.
Unless there are no negative cues to inherit overnight, NIFTY may see a positive start to the day. The levels of 17230 and 17300 are likely to act as immediate resistance points. The supports come in at 17100 and 17020 levels.
The Relative Strength Index is 37.49; it is neutral and does not show any divergence against the price. The daily MACD is bearish and below the signal line.
Apart from a white body that emerged, no other formations were noticed on the charts. Also, an Inside Bar occurred. This happens when the current trading day has a lower high but higher low.
The pattern analysis also shows that the head & shoulder pattern breakdown that the markets saw has also achieved its price measurement implications to most of the extent. The low of 16782 remains sacrosanct support for the markets in the near term unless violated.
The market breadth improved as the NIFTY saw 35 of its stocks advancing against 14 declining while 1 remained unchanged. The broader market breadth also improved. Going into Thursday’s session, it would be crucial that the NIFTY keeps its head above 100-DMA which presently stands at 17139 on a closing basis. NIFTY defending the 100-DMA at close will be very crucial for the markets in the near term. All in all, we will see markets staying highly stock-specific in nature until a firm reversal point is in place. While continuing to stay light on positions, 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)
