In Wednesday’s note, we reported that Nifty had created some space for itself and shifted the maximum call open interest to the 16,000 level. The market opened on a calm note but gradually climbed up and maintained its gains throughout the day. Finally, the headline index closed with a net gain of 70.25 points, or 0.44 percent.
Next week’s options data shows that Nifty has shifted its resistance point to 16,200 level as this strike has the maximum concentration of call open interest at the start of new options week. From a technical perspective, Nifty has raised the chances of a possible resumption of growth if it is able to hold its head above the 15,850 level. As long as these levels are hedged, there is potential for incremental growth. A breach of the 15,850 level will lead to a revival in the market.
While a steady start to the day is expected, the 16,000 and 16,045 levels will act as potential resistance points, while support will lie at the 15,850 and 15,810 levels. The trading range is expected to be wider than normal.
The Relative Strength Index (RSI) stood at 62.45 on the daily chart. It showed a bearish divergence against the price. While the price made a new 14-period high, the RSI did not, resulting in a bearish divergence. The daily MACD remains bearish and remains below the signal line.
Pattern analysis shows that Nifty marked its previous high of 15,915 a couple of weeks back, and then consolidated in a defined range. This time it has registered a new growth. There will be a test to see if it resumes the uptrend after a sideways consolidation.
Overall, some resumption of upward movement is likely. However, for this to happen, it would be necessary for the Nifty to keep its head above the 15,850 level. As long as this level is defended, we could see some more upside. On the other hand, if there is a breach of the level of 15,850 then the market can again move towards strength. As we follow the trend, we must not forget that the internal strength and breadth of the market remain weak and not as strong as they should be. Because of this, traders should keep trailing stop losses as they follow the momentum and continue to protect profits at higher levels.