After a flat start to the session, the Nifty50 index soon drifted in the negative territory and formed its intraday low point. The markets soon crawled back inside the positive zone. For the rest of the session, the benchmark index traded in a limited range, but maintained its modest gains. The benchmark index ended with a net gain of 33.95 points (0.21 per cent).
The only concern for the market is that Nifty50 is now a bit overbought on the daily charts. This may cause the markets to consolidate; apart from that, the underlying strength remains absolutely intact. The strength is evidenced by the high Put option writing that was seen at 16,500-point strike price. This means that if the index sees some corrective move, it is more likely to consolidate and find buying at lower levels.
The blue chip index is showing that a major corrective move is unlikely going by the day’s futures and options unless there is a tactical change in it. So, as long as the Nifty50 keeps its head above 16,450-16,500 points, it will continue to consolidate with a positive bias.
ETMarkets.comDuring the session, volatility in the market inched higher as India VIX index rose by 3.60 per cent to 13.4575. Tuesday is likely to see the levels of 16,600 and 16,635 points act as potential resistance; the support is likely to come in at 16,500 and 16,455-point levels.
The Relative Strength Index (RSI) is 76.30; it has marked a new 14-period high which is bullish. RSI is in the overbought zone, but it remains neutral and does not show any divergence against the price. The daily MACD is bullish and stays above the signal line. Apart from a white body that emerged, no other major formation was seen on the candles.
Going by the present technical setup, it is beyond doubt that the Nifty50 is showing strong bullish undercurrent. However, keeping the overbought conditions in view, we recommend vigilantly protecting profits on existing positions. Using trailing stop-losses is advised to protect profits. While shorts should be avoided, all fresh purchases should be kept focused on those stocks/sectors that are expected to improve their relative strength against the Nifty50 and start reversing their relative underperformance. A cautiously positive outlook 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 milan.vaishnav@equityresearch.asia)
