With the concentration of maximum Call open interest at 9,500, Nifty did not move past that level throughout the session, which was evidently controlled by expiry-led moves.
The domestic equity market on Thursday saw an extension of the pullback on the expected lines. Nifty saw a better-than-expected opening once again, which saw it open above the 50-DMA level. Expiry of May series derivative contracts and weekly options orchestrated the market move during the session.
After a positive start, Nifty tested its highs in late morning trade and traded sideways in a defined trajectory for the rest of the session. The headline index finally ended near its high point with a gain of 175.15 points, or 1.88 per cent.
With the concentration of maximum Call open interest at 9,500, Nifty did not move past that level throughout the session, which was evidently controlled by expiry-led moves. Volatility also declined sharply as volatility index INDIA VIX fell another 4.01 per cent to 30.0175. Nifty has risen over 450 points in the past two sessions; which increases the possibility of some consolidation at higher levels. With the index now above 50-DMA, which currently stands at 8,986, it will now act as support on a closing basis.
On Friday, Nifty is likely to face resistance at 9,525 and 9,565 levels, while supports will come in lower at 9,410 and 9,365 levels.
The Relative Strength Index (RSI) on the daily chart stood at 57.06; it showed a bearish divergence against price as the RSI did not mark a new 14-period high along with the price.
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The daily MACD remained bullish, as it traded above the signal line. A Rising Widow occurred on the candles. This resultes out of a gap-up and usually translates into the continuation of the up-move. However, a confirmation will be needed on the next trading bar.
Pattern analysis showed Nifty has averted a breakdown, at least on the immediate short-term basis. The index has managed to move past the 50-DMA on a closing basis, which currently stands at 8,986. As long as the index trades above this level, we will see Nifty trade with a positive bias.
All in all, the market is showing signs of sustaining the short-term momentum on the upside. We recommend avoiding shorts with every rise and approaching the market individually on a highly selective and stock-specific manner. The near-term indicators show the upside momentum may persist for some time. However, consolidation at current levels cannot be ruled out, given the market’s rise in last two sessions. We recommend avoiding large positions on either side and following the up-moves with a stock-specific approach.
(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)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
