After slipping below the crucial 200-DMA level, the Indian equities got some mild technical pullback. They opened higher and maintained their gains through the day while ending with modest gains. The NIFTY saw a mildly gap-up opening. However, after a strong start, the markets pared their opening gains in the early minutes of the trade only to recover again. After that, the entire session was spent by the markets in a sideways trajectory; the index oscillated in a capped range. While the bulk of the gains was maintained, the headline index ended with a net gain of 177.90 points (+1.05%).
Being Thursday, we have weekly options expiry coming up. As of now, 17000 strikes have seen the highest Put writing taking place; the NIFTY is unlikely to slip below this level. On the other hand, the 17500 strikes have the maximum Call OI accumulation followed by the 17200 levels. This means that if 17200 is taken out, we may see the extension of the technical pullback; if not, we are all likely to see the markets oscillating in a range. The 200-DMA stands at 17177; the NIFTY has closed a notch below this point. However, with the filters, this level still holds as a support on a closing basis. It would be of utmost importance for the NIFTY to crawl comfortably above the 200-DMA on a closing basis. If this level is violated, it is bound to invite incremental weakness.
Thursday is likely to see the levels of 17200 and 17325 acting as probable resistance points. The supports come in at 17090 and 17000 levels.
The Relative Strength Index (RSI) on the daily chart is 45.77; it is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
An inside bar formation occurred on the charts; this also resulted in the formation of a Bullish Harami candle. This happens when the current candle is completely engulfed by the prior candle.
The pattern analysis shows that the NIFTY slipped below the 200-DMA which presently stands at 17177; in the previous session, it took support at the extended trend line that exists near 16950. It bounced back from there to end just at the 200-DMA.
The weekly options expiry will affect the intraday trend; however, on Thursday or after that, it would be extremely crucial for the markets to crawl above the 200-DMA mark and keep their head above that point. The longer the NIFTY stays even a not below this point, the higher will it remains vulnerable to incremental weakness. We recommend continuing to avoid high leveraged positions. While staying highly cautious, a 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)
