The Indian equity markets somewhat had an underperforming day as it did open with a gap up, but ended with just some modest gains. Following a buoyant technical setup in the global markets, NIFTY opened strong with a gap. However, in the first two hours of the trade, the NIFTY pared all its gains and slipped in the negative territory forming the low for the day. However, it did manage to recover from its lows to crawl back in the green. The index traded sideways in the second half of the day while not making any meaningful moves. The markets ended with the NIFTY posting a modest gain of 45.95 points (+0.28%).
We are in the expiry week; the options data suggest the level of 16500 acting as an inflection point. The 16400 levels have seen a lot of PUT OI addition. This implies that there are little chances of the NIFTY slipping below this point as per the current options data. In the same way, the 16500 level shows a high Call OI addition. This makes the NIFTY in the very narrow zone of 16400 and 16500 with the meaningful moves expected only below 16400 or above 16500. Volatility declined; INDIAVIX came off by 1.85% to 13.6850. Moving past of NIFTY above 16500 will be crucial for any continued up move.
The Relative Strength Index (RSI) on the daily chart is 66.95; it is neutral and does not show any divergence against the price. The daily MACD stays bullish and above the signal line. Apart from a black body that occurred on the candles, no other formation was noticed.
The pattern analysis shows that following a breakout from 15900-15950 levels, the NIFTY surged higher and consolidated again near the 16300-16350 zone. These levels were tested again at the beginning of this week and they are presently the likely support for the markets in the immediate short-term.
Although the NIFTY did not post any major gains, there are no signs as yet on the charts that suggest any major weakness. So long as the NIFTY is above the 16000 levels, the breakout that has occurred after nearly eight weeks of consolidation remains very much valid and in place. We recommend continuing to approach the markets on similar lines. While avoiding aggressive shorts, focusing on the large caps which have underperformed in recent times may be rewarding. A cautiously positive view 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)
