In the absence of any overnight negative cue, headline index Nifty opened on a buoyant note. Sensex tested the historic figure of 50,000, and on anticipated lines, came under heavy profit booking while it also remained highly influenced by the weekly options expiry.
Following the decent gain that was maintained until late afternoon trade, the last hour-and-a-half of the session saw Nifty paring all its gains and slipping well into the negative territory. After some recovery from the low point, the index finally ended the day with a net loss of 54.35 points or 0.37 per cent.
From a technical perspective, there are two ways to look at the present trade setup. First, Nifty has stayed strong and the underlying trends are bullish. This is reflected from the fact that the index did not correct much and just gave up the gains while consolidating. On the other hand, the options data also influenced the trade highly.
The highest Call OI stayed constant at 14,750, ensuring that Nifty does not go above this level. On the other hand, Nifty found strong support near 14,500, where high Put OI was seen since the last two days. From a technical perspective, the index will have to move past and stay above 14,650 if it has to post any incremental gain.
Volatility increased marginally as India VIX climbed by 2.92 per cent to 22.1800. Friday’s session may see some modest technical pullback. The levels of 14,650 and 14,745 will act as immediate resistance points, while support will come in at 14,550 and 14,500 levels.
The Relative Strength Index (RSI) on the daily chart is 68.64; it slipped below 70 from a mildly overbought area. It remains neutral and does not show any divergence against price. The daily MACD was bearish and stayed below its Signal Line. Apart from a black body that emerged on the charts, no other formation was noticed.
All and all, from a pattern analysis point of view, Nifty’s behavior against the levels of 14,650 will be extremely crucial not just for the next trading session, but also over the coming days in the immediate short term. As long as the index remains below 14,650, there are chances of the market remaining under broad consolidation for some time. Nifty will be able to post incremental gain if it is able to move past 14,650 and stay above that. The derivative figures also hint at limited downsides in the market. We recommend staying put with sectors which are showing strong or improving relative strength against the broader market. While staying highly stock specific, a cautiously positive approach is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)