The index opened on a lower note but showed a great amount of resilience at lower levels. It did fell below 14,200 but a short covering from the lower levels saw Nifty rebounding over 200 points from the low point of the day. The index not only managed to crawl back into the positive territory but also ended with a net gain of 109.75 points or 0.77 per cent.
Much on the anticipated lines, the session also saw itself greatly influenced by the weekly options expiry. As mentioned in the previous note, the levels of 14,000 and 14,200 had maximum concentration of Put OI, this shifted higher following a heavy short covering from the lower levels. It is important to note that the rebound was purely on the basis of short covering; this was evident as Nifty April month futures shed over 4.36 per cent in Net Open Interest. Following the pullback, NIFTY PCR across all expiries also rose to 1.27. Volatility increased marginally as India VIX rose by 2.68 per cent to 23.0250.
ET CONTRIBUTORSThe market is likely to have a stable start to the day on Friday. The levels of 14,450 and 14,490 will act as resistance points, while support will come in at 14,310 and 14,250.
The Relative Strength Index (RSI) on the daily chart stood neutral at 44.23 and did not show any divergence against price. The daily MACD stood bearish and below its Signal Line. A piercing line occurred on the candles; this may have some good implications going ahead, but given the current technical setup, the bullish implications may remain limited.
The pattern analysis shows that Nifty is still well within the falling channel formed following marking of the high point at 15,431. In the process, it trades well below its 50-DMA at 14,837.
The current technical rebound has seen the index again closing a notch above its 100-DMA at 14,361. In the present technical setup, Nifty will not take any directional move as long as it continues to stay within the falling channel. The market breadth remains weak, and this keeps the frontline index move less convincing and strong. This is also evident from the behavior of the RSI which is not moving into bullish zones despite the up moves in the market.
We reiterate not getting carried away by technical pullbacks. The market is highly stock-specific in nature and it will continue staying this way for some more time. It is suggested to stay light on positions and continue approaching the market in a highly defensive way.
(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)
