Trade Setup: Unless directional bias emerges, avoid aggressive positions

However, Nifty witnessed over a 280-point recovery from the morning low. It not only recouped all its losses, but also went on to add gains after moving in the positive territory. It stayed in the positive trajectory, but did not add much to the gains and also did not take any definite directional bias from there. The recovery was given up partially and the index finally closed with a net loss of 69.65 points (-0.40 per cent).

We remain in the monthly derivative series expiry week. Apart from this, the situation on the geopolitical front between Russia and Ukraine remains fluid and uncertain. This has taken a toll on the market sentiments. Apart from this, from the technical perspective, Nifty has a strong resistance area of 17,500-17,650 on the higher side.

On the lower side, Nifty has tested a confluence area of two trend line supports as evident on the charts. This makes the level of 17,200 a sort of inflection point for the markets. For Nifty to see a technical pullback, keeping its head above 17,200 will be crucial. In other words, any slip below 17,200 will see some incremental weakness creeping into the markets.

Tuesday is likely to see the levels of 17,280 and 17,335 acting as immediate resistance points; the supports come in at 17,120 and 17,030 levels.

The Relative Strength Index (RSI) on the daily chart is 45.25; it continues to remain neutral and does not show any divergence against the price. The daily MACD is bearish and stays below its signal line.

ET CONTRIBUTORS

A Doji candle emerged on the candles. Subject to confirmation, it may lead to a potential reversal point for the markets.

Even if the levels of 17,200 may act as inflection point for the markets, the weekly options expiry data show maximum Call writing taking place at 17,200 levels. The overall options data shows the maximum Put OI at 17,000 levels whereas the highest Call OI is seen at 17,500 levels.

This validates that Nifty’s price behavior against the 17,200 levels will be crucial. Unless a directional bias is established, it is recommended to stay away from creating aggressive positions. It is reiterated that a cautious and selective approach be adopted 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])