It was yet another day of buoyancy for the Indian capital markets; the NIFTY opened positive, inched higher, and went on to close at a new lifetime high point. The markets saw a gap up opening for the third day in a row; the session, however, remained that of a narrow range as the Index oscillated in just 100-point range throughout the day. The markets opened higher and marked the high point of the day in the first minutes of the session. However, the trajectory for the markets remained absolutely sideways; NIFTY took no further intraday directional cue. The markets ended with net gains of 138.50 points (+0.76%).
The markets are now quite overextended and stretched on charts and the weekly options data present interesting insights. Monday’s session saw the highest Call writing at 18500 levels; this means that majority of market participants on Monday’s session believed that NIFTY is unlikely to slip below this point. On the other hand, 18500 also happen to hold maximum Call OI on a closing basis with the highest PUT OI at 18300. This means that the levels of 18500 will act as an inflection point; if the NIFTY stays below it, then it is likely to slip into consolidation with 18300 acting as support.
Volatility shot up; INDIAVIX surged by 8.99% to 17.1850. Tuesday is likely to see a quiet start to the day. The levels of 18500 and 18585 will act as resistance points. The supports come in at 18400 and 18365 levels.
The Relative Strength Index (RSI) on the daily chart is 77.70; it stays overbought and continues to show a mild negative divergence against the price. The daily MACD is bullish and trades above the signal line. A Spinning Top occurred on the candles; this essentially forms as there is a little price action during the day. Such a formation at the high point holds the potential to halting the current uptrend and sending the markets into ranged consolidation. However, any such thing would require confirmation on the next trading day.
All and all, the internal strength of NIFTY stays absolutely intact. However, the charts are a bit overstretched and some consolidation at current or higher levels cannot be ruled out. Watching the price behavior of NIFTY against the levels of 18500 would be crucial to watch. If the NIFTY stays below 18500 for long, there are will be higher chances that it slips under some consolidation which also is likely to be range-bound and with limited downsides. We recommend sticking to stock-specific purchases and use all further up moves to book and protect profits rather than making leveraged purchases. A cautious 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)
