Indian equity markets continued to correct for the second day in a row as it ended the day with a cut. The markets had a stable start to the day on the expected lines, but it soon slipped into the negative territory. However, this slippage was recovered in the first hour of the session while NIFTY also went on to mark its day’s high. However, corrective pressure soon gripped the markets again; the NIFTY slipped in the negative territory again and kept gradually losing ground. The index stayed in the negative territory throughout the day. While some recovery from the low point of the day was seen, the headline index ended the day with a net cut of 152.15 points (-0.83%).
We enter the weekly options expiry on Thursday, Options data show that the markets may continue to stay under corrective pressure. All technical pullbacks, as and when happens, will remain limited in their extent. No major downside cracks may happen but any runaway up moves are also less likely. The options data shows that while 18400 saw the highest call writing on Wednesday, the strikes of 18500 continue to hold maximum Call OI. Unless there is a major thrust on the upside, NIFTY is unlikely to move past this point. On the lower side, 18000 continues to hold the highest Put OI.
There are possibilities of the NIFTY trying to get some stability after two days of wide-ranging moves. The levels 18290 and 18335 are likely to act as resistance. The supports are likely to come in at 18200 and 18165.
The Relative Strength Index (RSI) on the daily chart is 67.01. It is neutral and does not show any divergence against the price. The RSI has slipped below 70 from an overbought zone. The daily MACD is bullish and continues to trade above the signal line. A large black body emerged; it reflects the directional consensus of the market participants on the downside.
The pattern analysis shows that the NIFTY has marked a temporary top near 18600 levels; unless this point is taken out, it is unlikely to show any runaway moves. On the other hand, it has created a base in the 18000-18200 zones; this marks a broad consolidation zone between 18000-18600 levels.
Thursday’s session is likely to stay influenced with weekly options expiry. In absence of any positive thrust, NIFTY is unlikely to move past 18400 levels and unlikely to slip below 18000. The options data for the expiry and also for the coming month-end expiry hints at the NIFTY staying between 18000-18500 levels. We recommend continuing to stay highly stock-specific and avoid aggressive shorts. Profits on either side should be vigilantly protected while keeping leveraged exposures at modest 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)
