The headline index Nifty had a modestly negative opening on the expected lines. It slipped further in morning trade to mark the low point of the day. Just when it seemed that a corrective move had set in, Nifty had a smart recovery as it rebounded over 100 points from its low. The index transformed itself into a rising trajectory; it not only recouped the losses but also went on to enter the positive territory. The last hour of the session was spent in a range bound manner. Nifty ended flat with a negligible gain of 9.70 points or 0.07 per cent.
ET CONTRIBUTORSThe high point for Nifty was at 13,579. Options data suggested that the highest Call OI concentration stood at 13,600 level. This makes the zone of 13,500-13,600 very crucial, and the next level to watch out for any incremental up move. The index continues to stay overstretched on the charts. In order to make the current up move sustainable and healthy in the near term, some wide ranged consolidation is imminent sooner or later.
Keep a close eye on any possible pullback in US Dollar Index (DXY). Volatility remained more or less unchanged with India VIX falling by a nominal 0.30 per cent to 19.3450.
The daily RSI is 77.54; it shows a mild negative divergence against price. The daily MACD is bullish and above the Signal Line. However, the histogram remains flattened, showing the market in the consolidation state and devoid of any incremental momentum. A Spinning Top occurred on the candles. This warrants caution as the occurrence of Doji or Spinning Tops near the high point can lead to a temporary disruption in the up move.
Overall, if we combine the pattern analysis and the F&O data, it is beyond any reasonable doubt that Nifty is quite overextended on the charts. F&O data suggested a continued heavy Call writing at 13,600 levels. This means that the
overextended market may find resistance at 13,600, and this level should be watched while chasing the current momentum or moves.
Overall, the analysis for Wednesday remains on the existing lines as the market is expected to show vulnerability at current and higher levels. At any time, a sharp profit taking bout should not come as a surprise as some consolidation is overdue to keep the current up move healthy and sustainable. We recommend continuing to approach the market with caution, while staying stock-specific and keeping the exposures at modest levels.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
