Gemstone Equity Research & Advisory Services

Outlook For Wednesday: NIFTY's Behavior Against This Level Will Be Decisive Point

After attempting a breakout in the previous session, the stock markets consolidated before making any further moves. The markets saw a stable start to the day on anticipated lines. The NIFTY marked its day’s high point in the early morning trade; after that it slipped inside the negative territory. The entire session was spent where the NIFTY kept going on the either side of its previous close; it took no directional bias through out the day. After spending the entire session in a sideways trajectory and within a limited range, the headline index closed flat with a negligible loss of 7.95 points (-0.05%).

While the markets did nothing and spent the day in a directionless session, some noteworthy developments were reflected in the Options data. As we head into the penultimate day of the weekly options expiry, it is important to take these statistics into consideration. The 15600-strike price saw high Call writing of 1.9 million shares as of the end of the day. The OI that was added saw an increase of 1.9 million; however, at one point in time intraday, it had shown an increase of 2.9 million which even overtook the 16000 levels in terms of maximum Call OI. The strike of 16000 still holds a maximum call OI of 5.2 million followed by 15600 which has a Call OI concentration of 4.2 million.

The above data means that the NIFTY has formidable resistance at 15600; in the same breath, if it takes out 15600 it has the potential to test higher levels. The NIFTY’s behavior against the level of 15600 will be crucial to watch until the expiry of the current weekly options. The levels of 15600 and 15685 will act as resistance; supports will come in at 15500 and 15415 levels.

The Relative Strength Index (RSI) on the daily chart is 68.87; it is neutral and does not show any divergence against the price. The daily MACD is bullish and above its signal line. A spinning top occurred on the candles; it shows a lack of directional consensus of the market participants for the session.

All and all, it is needless to reiterate that so long as the NIFTY is above the breakout level of 15430, the present attempt to breakout remains valid and in place. However, while keeping the analysis on the similar lines, we also reiterate the importance of keeping a close eye on volatility and the market breadth; both of this remain a concern for the near term. Volatility rose only marginally by 2.97% to 17.3875.

We maintain a cautious stance on the markets; would recommend focusing more on the defensive stocks while following the current momentum on the upside. The improvement in the relative strength is seen in the defensive space; this is likely to continue for the immediate near-term. We recommend continuing to keep exposures at modest levels while approaching the markets on a highly cautious note.

This was first published by The Economic Times.

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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