Ahead of the FOMC meet outcome, the key indices chose to stay highly guarded whereas the broader markets showed a widespread rally on Wednesday. The session saw a flat start to the trading day. The NIFTY opened modestly positive and spent the entire session moving in a sideways trajectory. The index kept oscillating in a narrow 70-odd points range but ultimately took no directional bias throughout the day. The NIFTY, however, managed to stay above the 17500 levels. The headline index finally closed with a minor loss of 15.35 points (-0.09%).
We have overnight FOMC meet outcome to deal with along with the weekly options expiry that is slated to come up on Thursday. The weekly options data shows unwinding of Calls at 17400 and 17500 strikes; it also shows PUTwriting at these two points. If we interpret the options data for Thursday’s expiry, it shows that the markets participants do not expect the NIFTY to slip below 17400 levels. However, these are indicative inputs as the markets will inherit the overnight global trade setup. Volatility remained absent; the INDIAVIX slipped mildly by 0.17% to 16.4925.
The opening of the markets and the trajectory that it forms on Thursday will dominate the trend for the rest of the day. The levels of 17600 and 17665 will act as immediate resistance points; the supports will come in at 17500 and 17410 levels.
The Relative Strength Index (RSI) on the daily chart is 71.37. Though it is mildly overbought, it remains neutral and does not show any divergence against the price. The daily MACD stays bearish and trades below its signal line.
The pattern analysis shows that the NIFTY has formed a consolidation range as shown by the red and the green lines on the charts. The zone is created between 17350-17400 levels on the lower side and 17790 on the upper side. Unless the NIFTY violates the lower levels or breaches the upper one, we will continue to see the markets oscillating in this range.
All in all, so long as the NIFTY is comfortably trading above the 17350-17400 zones, shorts should be avoided. On the other hand, it is recommended that they should be kept limited in their quantum and focused only on those stocks and sectors that have to improve and rising Relative Strength against the broader markets. It is expected that if there are no negative overnight cues to deal with, we will see the frontline indexes play catchup against the broader markets. A continued selective 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)
