However, the index did manage to recover from its lows to crawl back into the green. The index traded sideways in the second half of the day but did not make any meaningful move. Nifty ended the session, posting a modest gain of 45.95 points (+0.28 per cent).
We are in the expiry week; the options data suggest the 16,500 level is acting as an inflection point. The 16,400 level has seen lot of Put Open Interest addition. This implies that there are little chances of Nifty slipping below this point as per the current options data.
In the same way, the 16,500 level shows high Call OI addition. This leaves Nifty in a very narrow zone between 16,400 and 16,500 levels, with meaningful move expected only below 16,400 level or above 16,500.
Volatility has declined. INDIA VIX has come off by 1.85 per cent to 13.6850. Moving past the 16,500 level will be crucial for Nifty to see any continued rise.
The Relative Strength Index (RSI) on the daily chart stood at 66.95; it is neutral and does not show any divergence against the price. The daily MACD stays bullish and is above the Signal Line. Apart from a black body that occurred on the candles, no other formation was noticed.
Pattern analysis showed that following a breakout from the 15,900-15,950 range, Nifty has surged and consolidated near 16,300-16,350 zone. These levels were retested at the beginning of this week and they are currently the likely support for the market in the immediate short term.
Although Nifty has not posted any major gain, there are no signs as yet on the charts that suggest any major weakness. So long as Nifty stays above the 16,000 level, the breakout that has occurred after nearly eight weeks of consolidation remains very much valid and in place.
We recommend approaching the market on the similar lines. While avoiding aggressive shorts, focusing on the large-caps which have underperformed in the recent times may be rewarding. A cautiously positive view is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at firstname.lastname@example.org.)