Trade setup: Nifty set for marginally negative start; resistance seen at 18,000-18,165

Indian equities saw a gap-up opening and maintained their gains throughout the day. Nifty continued to mark incremental highs during the session. There was no visible volatility in the trade; the markets showed no intent of any profit-booking at any point in time.

Following a steady trending day, the headline index ended the day with a strong gain of 190.60 points (+1.07 per cent).

Nifty has ended at the crucial 18,000 level; the highest Call OI has shifted to 18,500 levels. However, the second highest, and almost similar to the highest Call OI exists at 18,000 levels. This makes the level of 18,000 a deciding level that would dominate the trend for the coming days.

If Nifty is able to move past 18,000, it is all set to add further gains to its tally. If Nifty resists to 18,000, it may still consolidate in a broad but defined range. The behavior of the index against the level of 18,000 will be crucial to watch not only for tomorrow but also over the coming days.

Markets are set to see a modestly negative start to the day. While expecting a negative start, the levels of 18,000 and 18,165 will act as potential resistance points. The supports will come in at 17,910 and 17,830 levels.

The Relative Strength Index (RSI) on the daily chart is 67.77; it has marked a new 14- period high which is bullish. The RSI remains neutral and does not show any divergence against the price. The daily MACD is bullish and trades above the signal line. Apart from a white body that emerged, no other formation was noticed on the charts.

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All in all, if Nifty opens below the 18,000 levels, this point is likely to act as resistance for the markets. For any further sustainable extension of the move on the higher side, moving past and staying above this level will be extremely crucial.

Until this happens, we will see the markets continuing to consolidate a bit more in a defined range. We are also not expected to see any sectoral dominance in the markets. The broader markets are performing well; we will continue to see stock specific performance across the board regardless of the sector that belong to.

Given the global trade setup, relative outperformance in metals, financials, select autos and midcaps will continue. In the event of any downsides, it is recommended that it should be used to make select purchases. While avoiding shorts, 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 [email protected])