astute: Trade setup: given fluid external factors, the market may continue to show volatility
There were intermittent bouts of selling in this recovery process, but overall markets were able to recoup most of its losses. The Nifty title still ended the day with a net loss of 114.45 points (-0.67%).
We are entering the penultimate day of the expiration of the current month’s derivative series. Other than that, the strong rally in the 200-DMA further revalidates this point as major support for the markets on a closing basis. The 200-DMA currently stands at 17,876. Nifty has breached the uptrendline support. Going up, this pattern can act as likely resistance for the markets. According to the weekly options data, the 17,000 level saw a major sell-off in the previous session.
However, based on historical data, levels of 17,000 have a maximum concentration of Put OI; the highest call OI is at 17,500 levels. This indicates that if we don’t have any additional negative clues to deal with overnight, Nifty may stay above 17,000. If that happens, we could see the technical pullback extend a bit further.
Volatility has increased sharply. India’s VIX jumped 16.42% to 26.6625.
Wednesday is likely to see the 17,200 and 17,280 levels act as possible resistance points; supports are coming in at the 17000 and 16880 levels.
The Relative Strength Index (RSI) on the daily chart is 43; it remains neutral and shows no divergence from the price. The daily MACD is bearish and below its signal line.
A large bullish candle has formed on the charts. The occurrence of such a candle near the 200-DMA adds to the credibility and importance of this level as major support for the index on a closing basis.
Overall, the market once again avoided a chart breakdown by bouncing off the 200-DMA which currently stands at 16,876. volatility which should be a bit wider.
However, it is highly recommended to avoid creating shorts in the current situation, even if a decline is seen, as it may cause the shorts to compress heavily. All of these prints should be used to pick up good quality stock in modest quantities. A cautiously positive approach 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 in Vadodara. He can be contacted at [email protected])