The corrective undertone continued to persist in the Indian equity markets; the markets opened lower and extended their losses to end the day in the red. The NIFTY opened on a flat note but soon slipped in the negative territory. The index kept marking gradual incremental lows and showed no intention to recover during the day as the markets slipped below the psychologically important 18000 levels. Although some modest recovery was seen towards the end, the NIFTY still ended with a loss of 174.65 points (-0.96%).
We approach weekly options expiry; the session will stay dominated by the expiry-influenced activities. A large amount of Call writing was seen at 18000 and 18100 levels; however, the maximum Call OI still stands at 18300 levels. Given this options data, if the NIFTY is able to move past and stay above 18000 levels, it may see some short-covering from the current levels. In other words, NIFTY’s behavior against the levels of 18000 will be crucial to watch. The volatility remained unchanged; INDIAVIX rose by a negligible 0.21% to 17.8175.
Thursday is likely to see the levels of 18000 and 18195 acting as resistance points. The supports come in at 17900 17790 levels.
The Relative Strength Index (RSI) on the daily chart is 56.07; it has marked a new 14-period low which is bearish. RSI also shows a mild bearish divergence against the price. The daily MACD is bullish and remains above the signal line.
The pattern analysis shows that the NIFTY found strong and fierce resistance at the trend line; this trend line is the extended neckline of the bearish head and shoulders formation that was seen on the NIFTY. The pattern analysis also confirms that the zone of 18300-18400 has now become a strong resistance zone for the markets.
Even in the weak markets, some pockets continue to show strong relative outperformance on the expected line. This is expected to continue and it is likely that stocks from the Oil and Gas space, Financials, Auto, and select stocks from the broader universe may continue to relatively outperform the markets. It is recommended to keep the overall exposures at modest levels and markets should be approached on a highly selective note.
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)
