The index opened with a loss and drifted lower as the day progressed and made the low point of the day in the morning session. However, the afternoon session saw good amount of recovery of the index from its lowest level. Further, this was not sustained, and Nifty gave up the bulk of its recovery by late afternoon. The headline index ended the day with a net loss of 149.75 (-0.83%).
The derivatives data does not paint a pretty picture. It shows that Nifty is unlikely to move past the 18,000-18,100 range easily over the coming days. In Wednesday’s session, the level of 18,000 witnessed strong put unwinding. This means the market participants do not expect Nifty to close above this at least this weekly expiry on Thursday.
Further, being Thursday, we will also see weekly options expiry taking place. Very high fresh call writing on 17,900 was witnessed on Wednesday. The maximum Call OI accumulation stays at 18,000 making it a strong resistance point for Nifty.
Volatility also inched higher. IndiaVIX edged up by 2.89% to 19.0225. Thursday is likely to see the levels of 17,865 and 17,920 acting as potential resistance points. The supports come in at 17,760 and 17,680 levels.
The Relative Strength Index (RSI) on the daily chart is 61.63. It stays neutral against the price.
The daily MACD is bullish and stays below the signal line. A falling window occurred on the candles. This results out of a gap on the downside and usually resolves in the direction of the trend.
Nifty’s price action against the levels of 17,800 will be crucial. If Nifty opens and trades below this point, it will be difficult for the markets to move higher. Futures data also show that the decline in Nifty is resulted of unwinding of long positions.
The decline in the index has come with a massive decline of open interest. Nifty’s current month futures shed over 7.90 lakh or 7.23% in net Open Interest.
Overall, the longer Nifty spends time below 17,800, the more it will find it difficult to move up. The present technical situation shows more chances of Nifty staying under ranged consolidation.
(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 [email protected])