market outlook: Trade setup: Nifty immediate resistance seen at 15,735 and 15,780 levels; avoid aggressive bets

In a violent day of trade, the Indian markets oscillated either way on a weekly options expiry day and closed the day with modest loss. The Nifty saw a negative start to the day. After opening on a sharply lower note, it spent the first half of the session in a recovery mode. Despite a weak global setup, the Nifty displayed resilient behavior, and at one point in time, recovered all its morning losses.

However, the session pressure resurfaced again, and the markets witnessed selling pressure once again, which took it back near its low point again. Following a pullback in the last hour of the trade, the headline index ended with a net loss of 76.15 points or 0.48 per cent.

The session remained highly influenced with weekly options expiry. The maximum Call OI that was concentrated at higher levels shifted lower to 15,700 and this saw the Nifty settling lower than this point. From a technical perspective, the Nifty has marked the zone of 15,850-15,900 as an intermediate top. Unless this zone is taken out, the markets will continue to face selling pressure at current and higher levels. Volatility increased a bit. India VIX climbed 2.84% to 15.2875. The market breadth continued to remain weak as 38 of 50 stocks in the Nifty declined.

The markets may see a mild pullback, but inherent structure remains weak, and this may cause the markets to trade with a corrective intent. The levels of 15,735 and 15,780 will act as immediate resistance points; supports will come in lower at 15,605 and 15,530 levels.

Even for the coming week expiry, the 15,700 level saw the highest amount of Call writing and addition of OI. The daily RSI is 61.14. It has marked a new 14-period low, which is bearish. However, RSI is neutral and does not show any divergence against the price.

The daily MACD has shown a negative crossover; it is now bearish and trades below its signal line.

The pattern analysis suggests that if the throwback continues, this may take the index back to its breakout point of 15,450-15,500 levels.

All and all, the Nifty has shown a corrective retracement after having some classical distribution signs over the past several days. In the process, it has marked the zone of 15,850-15,900 as an intermediate top for the markets. With the given technical setup, any technical pullback, if at all that occurs, should be used to protect profits rather than making fresh purchases. We strongly reiterate continuing to avoid aggressive purchases and suggest approaching markets on a highly cautious note.

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia