Typically, in a weekly options expiry dominated session, the market traded in a defined range before ending the day with a minor gain. The market saw a positive opening as it marked its day’s high point in the early minutes of the trade.
However, the market pared its gains and slipped briefly in the negative. The rest of the session was spent with Nifty oscillating in a very narrow range while the market did not take any directional call. Some upside momentum was seen towards the end of the session. The index reached very near to the high point. It finally ended with a modest gain of 45.45 points (+0.25 per cent).
There was significant put writing seen at 18,200 levels; this ensured that Nifty kept its head above this point throughout the day. The monthly options data shows Nifty staying between 18,000-18,500 for the remainder of this month.
As we step into the next session, we have the technical setup offering somewhat mixed signals on the charts. The technical pullback that began after Nifty tested the lows of 16,400 has visibly overextended itself and may be prone to some consolidation.
On the other hand, the F&O data remains strong and the broader technical setup stays buoyant. So long as Nifty is able to stay above 18,100-18,200 levels, the upward momentum will stay intact.
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Friday is likely to see the levels of 18,300 and 18,375 as immediate resistance points. The supports come in at 18,160 and 18,050 levels. The trading range is expected to stay a little wider than usual.
The Relative Strength Index (RSI) on the daily chart is 69.30. It has made a new 14-period high which is bullish. The RSI is neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line.
All in all, the weakness in the US dollar index is aiding a kind of risk-on setup that we are presently witnessing in the markets. The current present technical pullback has seen Nifty rebounding nearly 1,600+ points from the lows witnessed in December.
The present move looks a bit over extended on the charts and some consolidation cannot be ruled out. However, the technical setup looks highly buoyant and consolidation phase, if any, should be used to make quality and stock-specific purchases.
While guarding profits vigilantly at higher levels, a cautiously positive outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at [email protected])
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