Headline index Nifty had a better-than-expected start to the day; it got stronger as the day progressed. As the index extended yesterday’s move, it stayed within a rising trajectory while marking incremental high points. Volatility remained absent even as Nifty marched ahead making new lifetime highs. The index ended with a gain of 123.55 points or 0.85 per cent.
The most important thing to look for in Thursday’s session would be Nifty’s behavior against 14,650 level. If the index stays above this and marches ahead, we may see a fresh breakout. This will also mean that Sensex may hit the historic figure of 50,000 as well. Ahead of the weekly options expiry, Open Interest data shows interesting insights. The 14,600 strike had maximum Put OI writing (selling) of 1.8 million shares. This strike had total Put OI of 2.6 million. This means that bulk of this OI got added on Wednesday. However, the highest Put OI of 3.7 million shares stood at 14,500.
On the other hand, maximum Call OI concentration stood at 14,700. However, the previous session had significant addition of Call OI at 14,750 as it tried opening some more upsides. There are chances that Nifty may move past 14,650 and stay above that. The worst case scenario has support zone at 14,500.
The coming session will see the levels of 14,700 and 14,755 acting as resistance points, while support will come in at 14,580 and 14,500 levels.
The daily RSI is 71.37. It got mildly overbought but remained neutral and did not show any divergence against price. The daily MACD was bearish and remained below its Signal Line. Thursday’s session remains crucial. Nifty is likely to march ahead with a breakout to new highs again. Sensex may also test the historic high level of 50,000. Nifty current month futures have also added over 4.29 lakh shares, or 3.57 per cent, in Open Interest, and this points at strong undercurrent.
Importantly, all these things come with another two points that market participants need to keep in mind. First, the big caveat here is that there should be no major negative cues to be inherited on the next day; and second, there are chances of some profit booking and retracement if Sensex touches 50,000. Keeping all this in mind, we recommend avoiding shorts and continue picking select stocks with vigilant protection of profits at higher levels. A cautiously positive outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at email@example.com)