Any dips must be used to buy quality stocks; positive outlook advised for the day

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It was a good trending day for the markets as they ended with a decent gain after recovering from an initially weak session. The Nifty had a positive start to the day, but quickly slipped into negative territory during the first hour of trading.

As the markets drifted into negative territory, the weakness intensified as the Nifty edged very close to the 15,900 levels. However, the second half of the session saw the markets pull off a beautiful reversal. Nifty rebounded more than 200 points from its low point and closed with a net gain of 144.35 points (+0.90%).

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There was a good opportunity for premium income on the expiry day. The 15,900 and 16,200 levels saw a large amount of Put and Call writes. This ensured that the Nifty did not slip below 15,900 and not exceed 16,200 levels.

However, despite these trend moves, the index continues to remain within the wide trading range of 15,700-16,400 levels. Any lasting directional bias will only be established after either of these levels are removed. Until that happens, we’ll see the Nifty oscillate within that defined range.

While continuing to stay within this defined range, there is a chance that the index will extend its upward move if there are no overnight negative cues to handle. The 16,235 and 16,350 levels will act as potential resistance points. Support comes in at the 16,080 and 16,000 levels.

The Relative Strength Index (RSI) on the daily chart is 43.83. This is an upward trajectory, which remains neutral and shows no divergence from the price. The daily MACD is bullish and is trading above the signal line.

A candle with a long lower shadow has appeared on the charts. It closely resembles a bullish hammer, except it has a small upper wick. Its appearance after a drop and near a support zone can lead to a potential reversal subject to confirmation on the charts.

Overall, it is expected that if there are no overnight clues to handle, the Nifty may extend its upward move. This could see markets attempting to test the upper edge of the current wide trading range. In any case, even if there are corrective movements, one should avoid shorting the markets. As long as the index is above 15,700 levels, any dips should be used to buy good quality stocks. A 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 in Vadodara. He can be contacted at [email protected])

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