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  • Milan Vaishnav, CMT, MSTA

Thursday Outlook: Weekly Option Expiry To Influence The Trade; This Level To Act As Inflection Point

Wednesday’s session remained thoroughly lackluster as the markets remained sideways for the entire day to end on a flat note. In one of the dullest days in recent past, the markets headed nowhere and spent the whole session oscillating in a limited range. The headline index led nowhere, moved in a narrow 30-point range and failed to take any major directional call. The session has remained more or less on the expected lines as the NIFTY is exhibiting reluctance while inching higher. The NIFTY ended with a negligible gains of 6.45 points or (+0.05%).

Though we expect a flat to mildly positive opening to the trade, we have a weekly options expiry coming, and it is likely to dominate the session. The fatigue and reluctance of the Markets are much evident at higher levels; the NIFTY has still managed to keep its head above the short-term 20-DMA which presently stands at 11826 and remains a critical level to watch.

Thursday is likely to see the levels of 11950 and 12000 acting as resistance points. Supports come in at 11880 and 11780.

The Relative Strength Index (RSI) on the daily chart is 56.9366, and it has marked a fresh 14-period high, which is bullish. The RSI does not show any divergence against the price. The daily MACD has shown a positive crossover, and it is now bullish while trading above its signal line.

A Spinning Top occurred on candles. Spinning tops are the candles with a small real body and often depicts an indecisive state of mind of the market participants. If it emerges at higher levels, it can potentially stall the momentum.

The weekly options data also throws up interesting insights. The strike price of 12000 has the highest Call OI built up while the highest Put OI exists at 11800 strikes. We can reasonably interpret that the NIFTY may not go well past 12000 and may find support at 11800 in the event of any weakness. However, interestingly, the 11900 strikes have second highest built up of both Call and Put OI. This means that the level of 11900 may act as an inflection point, and any slip below the 11900 levels may infuse weakness in the markets. We recommend approaching the markets with caution and avoid aggressive bets on either side.

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