After a strong move of over 400-points in the session before this one, the Nifty spent a day in a strong consolidation mode as it ended the day with a minor loss. The markets saw a positive start to the day and traded with modest gains in the first half of the session.
The index moved in a range as it sustained its modest gains. However, the afternoon trade that saw some sharp paring of gains. It had the markets give up all their gains and slip into the negative. A recovery followed after that but that was not sustained as well. After a ranged move, headline index ended negative with minor loss of 19 points (-0.12%).
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We have weekly options expiry lined up on Thursday. Though some 2 million shares of Put writing were seen at 16,200 strikes, the Nifty seems evenly placed as per the weekly options data. Consistent call writing was also seen at higher strikes. This means that on the weekly options expiry day of Thursday, Nifty’s behaviour vis-à-vis the level of 16,200 will be crucial. If the Nifty slips below this level, it may be pushed for some consolidation. The up move may get extended if the Nifty can keep its head above 16,200 levels. Market breadth also stayed even and balanced.
Thursday is likely to see the levels of 16,335 and 16,410 acting as potential resistance points. The supports come in at 16,200 and 16,030 levels.
The Relative Strength Index (RSI) on the daily chart is 40.52. It is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line. Apart from a black body that emerged on the Candles, no major formations were seen on the charts.
The pattern analysis shows that the Nifty has successfully held and validated the pattern support in the zone of 15700-15750 levels. Until this zone is protected, we will see the markets attempting a technical pullback and trade with a positive bias.
All in all, looking at the present technical setup, it is recommended that one continues to stay both — stock-specific and defensive. It would be prudent to keep exposures limited to select consumption, FMCG, Autos, IT and PSE stocks. These groups are likely to post strong relative outperformance against the broader markets.
While continuing to be highly selective in approaching the markets, 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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