Following a positive opening, headline index Nifty got stronger as the day progressed. At one point, it looked as if Nifty would continue with the breakout move. However, the market saw some profit-taking bouts at higher levels. The index not only pared all its gains but it also went on to slip in the negative territory. Some recovery followed which took the index back in the positive zone.
The weekly Options data throw up interesting insights. It suggests that Nifty may not see any major downside. Despite sharp profit-taking bouts at higher levels, 16,200 strike saw the highest amount of Put OI addition to the tune of 1.4 million shares. This means that a large number of market participants believe that the index may not settle below this point by Thursday weekly Options expiry. Though it is subject to change, it definitely offers some cues as we approach the second last day of the expiry. The price behavior of Nifty against the levels of 16,200 will be crucial to watch. The levels of 16,325 and 16,400 will act as immediate resistance levels, while support will come in at 16,240 and 16,180 levels.
The Relative Strength Index (RSI) on the daily chart stood neutral at 68.26 and did not show any divergence against price. The daily MACD was bullish and traded above the Signal Line. Yet another Spinning Top emerged on the charts. The session had a very little difference between the opening and closing levels; it has come very close to being called a Doji. This continues to reflect lack of directional consensus among market participants. The pattern analysis shows that the breakout that occurred after Nifty took out the important 15,900-15,950 zone is very much valid. It continues to show some more strength as the index is showing no intention to correct. Instead, it continues to consolidate at higher levels.
With the market consolidating for the fourth day in a row, the analysis for the next session remains pretty much on similar lines. We recommend continuing to stick with largecap frontline stocks. As far as selection of stocks is concerned, it would be prudent to stay put with defensives like IT and FMCG. At the same time, Nifty Bank has relatively underperformed Nifty and this index may also play a catch-up over the coming days. A selective approach within the mentioned universe is suggested 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 milan.vaishnav@equityresearch.asia)