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Thursday Trade Setup: Options Data Shows Supports Shifting Higher; Volatility May Continue To Increase

On expected lines, the Indian equity markets put up a strong show and posted yet another day of gains. The markets saw a stable opening in line with the global trade setup. After opening positive, the NIFTY slipped briefly in the negative twice in the morning session. However, each time, it was able to crawl back inside the positive territory. The markets pulled itself back near its high point again by afternoon; for the rest of the day the markets were able to sustain that pullback and showed no intention to correct. The benchmark index ended with net gains of 93 points (+0.61%).

Thursday not only has regular weekly options expiry coming up, but it also has a monthly derivative expiry lined up. The session will continue to remain dominated with rollover centric activities. The previous session saw sustained Put writing at 15200, 15250 and 15300 levels. This indicates that the markets have tried hard to raise supports higher. While the highest Put OI stands at 15200, maximum Call OI concentration at 15500 levels. This defines the 15200-15300 as a broad range for the NIFTY for the expiry day.

On expected lines, the volatility spiked; INDIAVIX rose 10.77% to 20.8725. Thursday is likely to see the levels of 15375 and 15410 as resistance points; supports will come in at 15250 and 15180 levels.

The Relative Strength Index (RSI) is 63.19; it stays neutral and does not show any divergence against the price. The daily MACD is bullish and remains above the signal line. A white body emerged on the candles. Apart from this, no other significant formation was seen on the chart.

The pattern analysis shows that the NIFTY broke out from a falling channel, suffered a throwback, and resumed its up move. Presently, the breakout remains very much in force and valid. This has increased the possibility of the NIFTY testing its previous highs.

Broadly speaking, the undercurrent continues to remain buoyant. The NIFTY has successfully achieved the breakout, and in the process, it has raised its supports higher in the 15000-15200 zones. So long as the Index remains above this zone, the markets will continue to maintain inherent buoyancy. Volatility has spiked by over10% in the previous session on the expected lines. This is something traders will need to vigilantly guard against as it may infuse some profit taking bouts from higher levels. While continuing to chase the momentum carefully, a cautiously positive outlook is advised for the day.

This was first published in 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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