After three days of consolidation, the Indian equity markets attempted to inch higher and end with gains in a very narrow session on Monday. Despite a relatively weak global setup, the NIFTY opened on a very resilient note. It did slip in the negative territory twice after opening in the first hour of the trade, but it also managed to crawl back inside the green. The enter session was spent by the NIFTY oscillating in a narrow 90-points range. The NIFTY did not take any intraday directional bias and maintained its modest gains throughout the day. The headline index ended with a modest gain of 52.35 points (+0.29%).
As mentioned in the previous technical note, the NIFTY was able to keep its head above the 18200 levels. Monday’s session saw Call unwinding happening at 18200 levels as well as the NIFTY stayed above that point. As of today, the weekly options data show maximum Call OI at 18300 levels. We will see incremental gains coming in if the NIFTY is able to keep its head above this point. There is good support in the 18200-18300 levels; if this stands violated, the markets will become prone to ranged consolidation in the near term.
Tuesday is likely to see the levels of 18345 and 18390 acting as potential resistance points. The supports come in at 18240 and 18180 levels.
The Relative Strength Index (RSI) on the daily chart is 70.21; it remains mildly overbought also remains neutral as it does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.
The pattern analysis shows that the NIFTY took major support near 16400 levels following a strong bullish divergence of the RSI against the price. Since then, the NIFTY has rebounded close to 1800+ points; presently it trades above all its key moving averages but also looks a bit overextended.
All in all, the underlying current continues to remain buoyant. However, given the kind of technical pullback that we have seen, it is time to get a little less aggressive in making new purchases. There are no signals that hint at shorting the markets; however, there are certainly few signals that suggest protecting profits at higher levels. It is recommended that all up move from here must be used more for booking profits and taking some money off the table. While avoiding shorts, new purchases must be kept limited to defensive stocks and those stocks that have sharted to improve their relative strength against the broader markets.
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)
