Gemstone Equity Research & Advisory Services

Outlook For Wednesday: NIFTY Attempts A Yet Another Breakout; Keep Focus On These Sectors

Amid decelerating momentum, the Indian equities continued to pile up gain and ended yet another day on a lifetime high. Markets saw a decent and better-than-expected opening and traded within a capped range while maintaining the opening gains. It got stronger as the day progressed and spent the second half of the session staying in a rising trajectory. It went comfortably past the crucial 13000 levels and managed to end near the high point as it ended the day with a net gain of 128.70 points (+1.00%).

As the Index continued to pile up gains, it has done so with a decelerating momentum. Also, once again, the rise in the Index is coming with the rise in volatility as well. IndiaVix, which rose over 6% in the previous session, climbed another 1.25% to 21.0575. This is definitely a point to get slightly concerned about. Apart from this, as we enter the penultimate day of the expiry of the derivative series, the next two days will stay heavily dominated with the rollover centric activities.

Wednesday is likely to see the levels of 13100 and 13250 playing out as resistance points. The NIFTY, presently, remains in uncharted territory. The supports come in at 13000 and 12910 levels.

The Relative Strength Index (RSI) on the daily chart is 75.26. While the price marked a new high, RSI has not marked a high along with the price and this has resulted in a bearish divergence. The daily MACD is bullish as it trades above the signal line. However, the momentum is decelerating as exhibited by the histogram.

A white body emerged on the candles. Apart from this, no other important formation was noticed on the charts.

Although the maximum PUT OI stands at 12800, the 13000 PUT has seen lot of writing in the previous session. Through this, the traders expect that the NIFTY may not go below 13000 before expiry. However, this is not a sacrosanct indication and tight vigil should be maintained at current levels.

Near similar Call OI now exists at 13000 levels. All and all, regardless of anything, we are seeing a sharp improvement in relative strength of defensive sectors and this is likely to continue over the coming days. Given the display of inherent strength, shorts should be avoided but in the same breadth, the rally should not be chased either. We reiterate staying highly stock specific and continue protecting profits at higher levels.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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