Trade Setup: Strong possibilities that markets may extend their move; realty, consumption, and IT to get stronger in their relative performance

Very much on the anticipated lines, the Nifty made a strong breakout from the broad 15,700-16,400 trading range that it had formed over the past couple of weeks. In the previous technical note, it was mentioned that if the Nifty is able to move past and sustain above 16,400, it may see a strong move on the higher side.

The markets saw a gap up opening on Monday and saw the index opening well above 16,400 levels. The markets remained their gains throughout and did now show any inclination to correct. The headline index closed while posting strong gains of 308.95 points (+1.89%).

Monday’s move is very important from a technical perspective. The Nifty has dragged its support levels higher to 16,400. In the event of any consolidation or a downside, 16,400 is expected to lend support. The weekly options data shows that the 16,500 levels saw massive Put writing to the tune of 4.6 million shares, followed by 146,00 levels.

This means that the 16,400-16,500 zone is expected to lend strong support to Nifty in the immediate short term. The maximum Call OI is at 17,000; this also means that given the supportive global cues, the markets have got steam left in themselves, which can push them higher towards 17000 levels.

If there are no overnight negative global cues to inherit, Tuesday may see a stable start to the day. The Nifty is likely to find resistance at 16,700 and 16,795 levels. The supports come in at 16,580 and 16,500 levels.

The Relative Strength Index (RSI) stands at 54.11. It has marked a new 14-period high, which is bullish. RSI also stays neutral against the price. The daily MACD is bullish and stays above the signal line. A rising window emerged on the candles again. This is a breakaway gap, the most likely resolution of such patterns is usually in the direction of the trend, subject to confirmation.

There are strong possibilities that the markets extend their move. It is strongly suggested that in the event of any consolidation or minor corrective declines, one should strictly refrain from shorting the markets. In fact, such opportunities must be utilized to create good entry points in relatively stronger stocks.

We will continue seeing the pockets like Realty, Consumption, IT, PSE, etc., get stronger in their relative performance. Overall, 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 at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)


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