The markets have once again added massive shorts in the system. Wednesday’s decline has added fresh shorts; this is evident from the Nifty futures data. The October series of Nifty futures have added over 7.72 lakh shares or 6.40 per cent net Open Interest. This makes it evident that these shorts themselves will support the markets near key support and prevent any structural damage on the charts. These shorts are likely to ensure that the Nifty50 stays within the broad and defined consolidation zone. Even if the corrective mood persists in the markets on Thursday, the weekly options expiry data shows that the downsides may stay very limited.
Volatility spiked; India VIX surged 5.70 per cent to 17.3325. Thursday is likely to see a stable start to the day. The levels of 17700 and 17765 may well act as resistance points. The supports come in at 17600 and 17565 levels.
A bearish engulfing candle occurred on the daily chart. This has the potential to disrupt an uptrend if it occurs near the high point. In the present case, it has occurred in a consolidation zone and has added credibility to the resistance point of 17800. However, it may not have any serious bearish repercussions as it has emerged within an area pattern.
All and all the markets, in general, will continue to stay stock-specific. The oil and gas space is likely to continue to see a buoyant and relatively strong performance. The sectors and stocks like autos, pharma, select banks and PSE stocks may also show relatively resilient performance against the broader markets. We recommend strictly avoiding shorts as a short trap may occur. Fresh positions may be kept limited and vigilant protection of profits is advised at higher levels so long as the markets are within this broad range.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at firstname.lastname@example.org)