The markets, along expected lines, had a buoyant but somewhat volatile session on Wednesday where it managed to end with decent gains. A start above the 17,000 levels lead to heavy short covering. Overall, the headline index ended the day with a gain of 183.70 points or 1.08 per cent.
From a technical perspective, the most important development was that Nifty managed to defend the 100-DMA as a support on a closing basis. With weekly options expiry tomorrow, the options data throw some interesting insights. There was a heavy unwinding of calls seen at 17,300 levels. Call writing, meanwhile, was seen at 17,500. This strike holds maximum Call OI as of today. On the Put side, 17,000 shows the highest accumulation of Put OI, meaning that as long as Nifty keeps its head above this level, we can expect an extension of the current technical pullback on the upside.
The volatility cooled off in today’s trade as India VIX came off by 8.12 per cent to 19.45. If there are not any negative cues overnight, Nifty may see a positive start to the day. The levels of 17,230 and 17,300 are likely to act as immediate resistance points. The supports come in at 17,100 and 17,020 levels.
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The Relative Strength Index is 37.49 and neutral. It does not show any divergence against the price. The daily MACD is bearish and below the signal line.
On technical charts, apart from a white body that emerged, no other formations were noticed. Also, an Inside Bar occurred. This happens when the current trading day has a lower high but higher low.
The pattern analysis also shows that the Head & Shoulder pattern breakdown that the markets saw has also achieved its price measurement implications to most of the extent. The low of 16,782 remains sacrosanct support for the markets in the near term unless violated.
The market breadth improved as Nifty saw 35 of its stocks advancing against 14 that fell while one remained unchanged. The broader market breadth also improved.
Going into Thursday’s session, it would be crucial that Nifty keeps its head above 100-DMA which presently stands at 17,139 on a closing basis. Nifty defending the 100-DMA at close will be very crucial for the markets in the near term. We will see markets staying highly stock-specific in nature until a firm reversal point is in place. While continuing to stay light on positions, 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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