The market rebounded a nearly 130-odd points and ended on a flat note with a negligible gain of 2.15 points (+0.01 per cent). The recovery that was seen in the second half of the session was on the back of heavy short covering. It was evident as the market’s recovery came along with a reduction in Open Interest in Nifty futures. Nifty August futures shed over 5.20 lakh contracts or 4.08 per cent in Open Interest.
We also have weekly options expiry coming up. Options data showed highest Call OI accumulation at 16,300 level. This point will act as a key resistance unless Nifty opens above it and sustains there. As strike price 16,200 holds maximum Put OI, this point is likely to provide support to Nifty. Volatility remained unchanged. INDIA VIX gained 0.06 per cent to 12.7125 level.
In Thursday’s session, the 16,330 and 16,395 levels are likely to act as key resistance points, while supports are likely to come in at 12,200 and 12,170 levels. The Relative Strength Index (RSI) on the daily chart stood at 68.33. It remained neutral and showed no divergence against the price. The daily MACD remains bullish and is above the Signal Line.
A Hanging Man emerged on the candles. It would be crucial to see if Nifty can move past 16,350 level. Pattern analysis shows Nifty has been consolidating for six days in a row after staging a breakout from the 15,900-15,950 zone. The market has successfully sustained the breakout and has been consolidating near its high point. The market is recovering from the lower levels on the back of short covering, which shows discomfort among market participants at lower levels.
The market is expected to resume its bounce if Nifty can take out the 16,300 level convincingly. If not, we will see Nifty consolidate in a defined range. While staying stock-specific, investors are advised to protect profit at higher levels unless a definite resumption of uptrend is seen. A cautiously positive outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at email@example.com.)