The Indian equity markets continued to solidly outperform their global peers; the Nifty and the Sensex once again surged and ended at a new lifetime high levels. The NIFTY saw a stable start to the day; it marked its day’s low point in the opening minutes and never went in the negative territory even once. The entire session saw the NIFTY steadily inching higher marking gradual incremental highs. It managed to move past the 17500-levels and stay above it as well. In the end, the headline index ended with a net gain of 139.45 points (+0.80%).
We head towards the weekly options expiry on Thursday. The weekly options data show massive Put writing at 17400 and 17500 levels. The 17500 strikes 5.2 Million of addition of OI. The level of 17400, on the other side, has the highest accumulation of Put Open Interest. This suggests that unless there is any major weak overnight set up to deal with, the NIFTY has dragged its support levels considerably higher. The highest Call OI stands at 17500 followed by 17600. This makes the 17500 levels an inflection point for the NIFTY. If the NIFTY stays above it for long, we may see some incremental move happening on the upside.
The INDIAVIX edged higher by 1.14% to 13.7300. Thursday is likely to see the levels of 17565 and 17630 acting as immediate resistance points. The supports come in at 17400 and 17365.
The Relative Strength Index (RSI) on the daily chart is 83.86; it shows a negligible negative divergence against the price. However, such divergences tend to get corrected. The daily MACD is bullish; it remains above the signal line. A strong white body emerged on the candle; this reflects the directional consensus of the market participants on the upside.
The pattern analysis shows that the NIFTY is creating basing points after each up move; consolidates with that basing point as a support, and eventually resumes its up move. This as well, NIFTY has resumed its up move after six days of sideways consolidation.
As mentioned in the previous note, it was expected that some stock-specific performance may be seen from lagging sectors like Auto, Banks, etc. Such action was visible in the previous session; the overall fabric of the markets is likely to stay stock-specific as well over the coming days. We recommend avoiding shorts so long as the NIFTY is above its most recent basing point, i.e., 17400 levels. While staying highly selective in picking stocks, the momentum may be chased on the upside.
The levels of 17500 are likely to act as an inflection point for the NIFTY. If the index does not stay above 17500, some ranged consolidation cannot be ruled out from current 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)
