Nifty: Trade Setup: Nifty remains in consolidation; holding 18,100-18,150 levels key for further upside

It was a lacklustre day for the Indian equity markets as they continued to consolidate before ending the day with a modest loss. Nifty50 saw a positive and stable start to the day and traded in the green until late afternoon. It did not take any directional cue but protected its modest gains while trading sideways in a defined and capped range. It was in the last hour and a half of the session that saw some profit-taking bout affecting the markets. Later, Nifty50 slipped in the red and tested its key support levels. The headline index finally ended with a net loss of 57.45 points (-0.31 per cent).

We will see the weekly options expiry on Thursday and also the monthly derivatives expiry of the current month series. The present technical setup as well as the options data shows that the markets will remain influenced by the rollover-centric moves. The weekly options data shows a good amount of Call writing between the strikes of 18300 and 18500 with the strikes of 18300 holding the highest Call OI followed by 18500 levels. This means that 18300-level will continue to pose resistance to the index unless taken out comprehensively. On the other hand, 18000 holds maximum PUT OI followed by 18200 levels. This means that we are likely to have a range-bound session ahead of us unless 18300 is taken out.

Thursday is likely to see a stable start once again to the day. The levels of 18300 and 18355 will act as immediate resistance points. The supports come in at 18150 and 18020 levels.

The Relative Strength Index (RSI) on the daily chart is at 61.85; it is neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.

The pattern analysis shows that Nifty50 is within the well-defined trading range of 18000-18600 levels. So, as long as Nifty50 stays above 18100-18150 levels, it will continue seeing technical pullbacks from lower levels. On the upside, it has strong resistance in the 18500-18600 zone.
The market breadth is stable. Although it is definitely not as strong as it should be, it is not so weak either. Volatility changed a little; India Vix rose by 0.44 per cent to 16.8275. As we deal with the monthly derivatives expiry tomorrow, some volatility in the session cannot be ruled out even if the markets stay within the broad range. We recommend avoiding excessively leveraged positions, long or short, unless some directional cue on either side is established. From the technical setup that is seen currently and with analysing the Options data, there are high chances that Nifty50 will continue finding supports close to 18000 levels. A cautious outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)