The markets had a range-bound and a negative day as it weighed caution ahead of the FOMC meeting today. The NIFTY opened on a flat note; marked its intraday high point in the early seconds of the trade after which it immediately slipped into the negative territory. After a slip in the negative territory, the NIFTY stayed in the negative for the entire session as it kept oscillating in a defined range. The markets did not take any major directional calls throughout the day. The headline index ended the day with a net loss of 103.50 points (-0.60%).
From the technical perspective, NIFTY shows some divergent inputs. On one hand, the Index has slipped below the 100-DMA which stands at 17291. On the other hand, the NIFTY current month futures data show significant addition of fresh shorts in the system. With the NIFTY staying within the “filters” of the 100-DMA despite closing a notch below that point, it now gets extremely crucial for the index to crawl above the 17300 level to keep the 100-DMA stay defended on a closing basis. Given the number of shorts in the system, even if the weakness continues, NIFTY is likely to find support near current levels unless a very large negative factor is to be dealt with.
NIFTY is likely to see a stable start to the day. The levels of 17300 and 17355 will act as immediate resistance point; the supports come in at 17180 and 17050 levels.
The Relative Strength Index (RSI) on the daily chart is 43.55; it is neutral and does not show any divergence against the price. The daily MACD is bullish and above the signal line. Apart from a black body that emerged on the candle, no other major formations were seen on the charts.
All in all, Wednesday’s session saw some significant addition of shorts as reflected by the futures data. NIFTY December month futures added over 3.71 lakh shares or 3.14% in net Open Interest. This coming with the decline in the Index shows that fresh shorts were added to the system.
We have weekly options expiry coming up on Thursday. Though Tuesday saw maximum call writing at 17300, the levels of highest accumulation of Call OI is at 17500 levels. This means that if the NIFTY moves past 17300, we may see a stronger wave of short-covering again. Overall, the markets are likely to be in a range and trade with a weaker bias so long as the NIFTY is below the 17300 levels. Until this happens, and given the amount of shorts in the system, there will be limited downsides from the current levels in the market. In the same breadth, unless the level of 17300 is taken out convincingly, the markets are likely to continue staying in a range. A continued cautious 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)
