Trade setup: Risk-on mode to continue; metals, IT, financials to outperform

Indian equity markets refused to take a breather as benchmarks continued to surge, with Nifty ending yet another day on a strong note.

Markets saw a positive start to the day. Nifty opened higher and got stronger as the day progressed. The index moved past the 18,200 levels in the afternoon; however, it did come off its high point during the day.

Strength returned to the markets which took the index to the new high point of the day. The higher levels were maintained and the headline index finally ended the day with a decent gain of 156.60 points (+0.87 per cent).

With weekly options expiry coming up on Thursday, options data present a buoyant picture of the markets. If we look at the options data, the previous session saw high Call unwinding at 18,000 and 18,100 levels. At the same time, the strikes of 18,100 and 18,200 saw high Put writing taking place.

This means that the market participants are not expecting any major downsides in the market as per these figures, which are, of course, subject to change if any major negative has to be dealt with.

Also, it is important to note that the maximum Call OI has shifted higher to 18,500 levels; in the process, it has opened up some more room on the upside.

Thursday is likely to see the levels of 18,290 and 18,335 acting as important resistance levels. Supports may come in at 18,150 and 18,050. For any uptrend to extend itself, it would be crucial for Nifty to keep its head above 18,150-18,200 zone.

The Relative Strength Index (RSI) on the daily chart is 68.52; it has marked a new 14-period high which is bullish. The RSI is neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line.


A Rising Window occurred on the Candles. This is a result of a gap on the upside. Such formations usually resolve in the continuation of the uptrend. However, this will need confirmation on the next bar on the charts.

The pattern analysis shows that Nifty has tested and move above the “neckline” of the bearish Head and Shoulders formation which it had created and violated in the process. Nifty also continues to track the upper Bollinger bands that are widening in their structure.

The overall technical structure shows that the markets have a solid and strong underlying currents despite the fact that they may be in some consolidation. This would mean that even if there is expiry-influenced consolidation, the downsides will continue to stay limited. It is expected that a risk-on flavor is likely to continue; we will see metals, IT, financials and select pharma stocks may continue to relatively outperform.

It is also expected that the broader markets will continue doing better. In the event of any consolidation which may be just a ranged one, it is recommended to avoid shorts and use such opportunities to make select purchases. 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 (ChartWizard, FZE) and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)