After slipping below the crucial 200-DMA level, Indian equities got some mild technical pullback. They opened higher and maintained their gains through the day while ending with modest gains. Nifty saw a mildly gap-up opening.
However, after a strong start, the market pared its opening gains in the early minutes of the trade only to recover again. After that, the entire session was spent by the markets in a sideways trajectory. The index oscillated in a capped range. While the bulk of the gains were maintained, the headline index ended with a net gain of 177.90 points (+1.05%).
Being Thursday, we had weekly options expiry coming up. As of now, 17,000 strikes have seen highest Put writing taking place. Nifty is unlikely to slip below this level.
On the other hand, the 17,500 strikes have the maximum Call OI accumulation followed by the 17,200 levels. This means that if 17,200 is taken out, we may see the extension of the technical pullback. If not, we are all likely to see the markets oscillating in a range.
The 200-DMA stands at 17,177. Nifty has closed a notch below this point. However, with the filters, this level still holds as a support on a closing basis. It would be of utmost importance for Nifty to crawl comfortably above the 200-DMA on a closing basis. If this level is violated, it is bound to invite incremental weakness.
Thursday is likely to see the levels of 17,200 and 17,325 acting as probable resistance points. The supports come in at 17,090 and 17,000 levels.
The Relative Strength Index (RSI) on the daily chart is 45.77. It is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
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An inside bar formation occurred on the charts; this also resulted in formation of a Bullish Harami candle. This happens when the current candle is completely engulfed by the prior candle.
The pattern analysis shows that Nifty slipped below the 200-DMA which presently stands at 17,177. In the previous session it took support at the extended trend line that exists near 16,950. It bounced back from there to end just at the 200-DMA.
The weekly options expiry will affect the intraday trend. However, on Thursday or after that, it would be extremely crucial for Nifty to crawl above the 200-DMA mark and keep its head above that point.
The longer Nifty stays even not below this point, the more it will remain vulnerable to incremental weakness.
We recommend continuing to avoid high leveraged positions. While staying highly cautious, a selective approach 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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