In a strong surge fueled by short-covering, the Indian equity markets climbed higher for the second day in a row to end with robust gains. In yesterday’s technical note, it was mentioned that the NIFTY has ended just at the 100-DMA, and moving higher was important to further the up move. NIFTY today saw a gap-up opening, it opened much higher than the 100-DMA and stayed above that point for the rest of the session. There was literally no profit-taking that crept in at any time; the index managed to preserve all its gains while ending near the high point of the day. NIFTY ended the day with a strong gain of 293.05 (+1..71%).
The markets have once again moved comfortably above the 100-DMA which stands at 17212 making this area once an important support level on a closing basis. We head into the expiry of the weekly options; the options data suggests a range-bound market for Thursday. Following a good amount of Call unwinding taking place, the maximum Call OI now stands concentrated at 17600 followed by 17500 levels. The highest Put OI is at 17400 followed by 17300 levels. This means that there are lesser chances of any major corrective move; either the markets will extend their gains or they will stay range bound and consolidate in the current zone.
Thursday is likely to see a stable start to the day. The levels of 17500 and 17580 are likely to act as resistance points; the supports will come in at 17400 and 17360 levels.
The Relative Strength Index (RSI) has marked a 14-period high which is bullish. It remains neutral and does not show any divergence against the price. The daily MACD is bullish and below the signal line; however, the narrowing slope of the Histogram shows that it is moving towards a positive crossover in the coming days.
A rising window emerged on the candles. This results in a gap on a trading day where the low of the current candle is higher than the high of the previous candle. The usual implication of such a candle results in the continuation of the trend. However, in the present case, this is an area gap; the one that is within a trading range pattern and therefore may not be as potent as it should have been.
All in all, the NIFTY has risen over 560-points in two trading sessions. If that leads to some consolidation, that should not come as a surprise to anyone. We recommend now focusing more on the protection of profits at higher levels. All new purchases must be kept at modest levels with an increased focus on the defensive and low beta stocks. Shorts must be avoided so long as the NIFTY is above the 100-DMA levels. Overall, a positive 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)
