The markets continued to trade on the expected lines; the NIFTY exhibited a bearish undertone and extended its corrective move on Wednesday to end the day on a negative note. The NIFTY saw a weaker than expected start to the day. The markets opened with a loss and drifted lower as the day progressed and made the low point of the day in the morning session of the trade. However, the afternoon session saw a good amount of recovery of the index from its lowest level. However, this was not sustained, and the NIFTY gave up the bulk of its recovery by late afternoon. The headline index ended the day with a net loss of 149.75 (-0.83%).
The derivatives data do not paint a pretty picture; it shows that the NIFTY is unlikely to move past the 18000-18100 range easily over the coming days. In Wednesday’s session, the level of 18000 witnessed strong put unwinding; this means the market participants do not expect the NIFTY to close above this at least this weekly expiry on Thursday. Further, being Thursday, we will also see weekly options expiry taking place. Very high fresh call writing on 17900 was witnessed on Wednesday; the maximum Call OI accumulation stays at 18000 making it a strong resistance point for the NIFTY.
Volatility also inched higher; INDIAVIX edged up by 2.89% to 19.0225. Thursday is likely to see the levels of 17865 and 17920 acting as potential resistance points. The supports come in at 17760 and 17680 levels.
The Relative Strength Index (RSI) on the daily chart is 61.63; it stays neutral against the price. The daily MACD is bullish and stays below the signal line. A falling window occurred on the candles; this results because of a gap on the downside and usually resolves in the direction of the trend.
The NIFTY’s price action against the levels of 17800 will be crucial. If the NIFTY opens and trades below this point, it will be difficult for the markets to move higher. The futures data also show that the decline in NIFTY has resulted in the unwinding of long positions. The decline in the Index has come with a massive decline in Open Interest. The NIFTY current month futures shed over 7.90 lakh or 7.23% in net Open Interest. Overall, the longer the NIFTY spends time below 17800, the more it will find it difficult to move up. The present technical situation shows more chances of the NIFTY staying under ranged consolidation.
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)
