It was a day of strong consolidation again for the Indian equities as they struggled to hold on to pattern support while they ended the day with a modest cut. The markets saw a positive start to the day; however, they soon drifted into the negative territory.
The Nifty continued to get weaker as it slipped below the psychologically important 16,000 levels. The second half of the session saw the markets recovering from the low point of the day. After rebounding some 175-odd points from the lows, the headline index ended with a net loss of 72.95 points (-0.45%).
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We head into the weekly options expiry on Thursday and the session will remain typically influenced by the options expiry dominated moves.
Apart from this, the Nifty has been able to keep its head above 16000 levels — the price action of Nifty against the zone of 16,000-16,100 will be extremely important to watch.
Heavy PUT writing was seen at 16,000; unless there are any heavy overnight negative cues to deal with, there are greater chances that the Nifty may defend 16,000 levels.
Fresh shorts are again seen in the system as the index current month futures added over 6.40 lakh shares or 6.23% in OI. This addition of the OI has come with a decline in the index, and this confirms the addition of fresh shorts in the system.
Thursday is likely to see the levels of 16,230 and 16,315 acting as immediate resistance points and the supports come in at 16,050 and 15,960 levels.
The Relative Strength Index (RSI) on the daily chart is 31.80. It has made a new 14-period low which is bearish. However, it also remains neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
The analysis once again continues to remain on similar lines. The Nifty has respected the pattern support trend line that begins from the low point of 15,671 and joins the subsequent higher low on the charts.
The markets continue to have short build-up in the system; the present derivatives data does not offer any shorting opportunities as the risk-reward ratio remains largely unfavourable.
It is recommended to keep buying the dips and focus on the relatively stronger pockets and the low beta defensive universe.
( Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at [email protected])
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