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Monday, January 24, 2022

Business setup: No further regional dominance observed; avoid short positions

On the much-awaited lines, equity markets took respite after several days of strong moves and ended the day with losses. The session was influenced by weekly options expiration and it dominated the intraday trend for the markets.

After a weak overnight global trade setup, Nifty opened the Gap Down and remained gradually lower till the afternoon. It tried to recover from the low point of the day. However, no meaningful recovery was observed. The headline index ended the day with a net loss of 179.35 points (-1 per cent).

The maximum call OI during the day stood at 17,800 levels. This ensured that the Nifty did not move beyond this level despite the recovery and fell below this point. Nifty closed above the upper Bollinger band.

Thursday’s session has again pulled the index inside the bands. However, it remains comfortably above all major moving averages, with key support near 17,500 in the near term.

In the coming days, as per options data, Nifty will continue to find resistance at 18,000 level. This means that some consolidation is likely to continue in the markets, which, in fact, would be healthy given the stellar performance of the market over the past few days.

The 17,800 and 17,865 levels are likely to be seen as resistance points on Friday. Support lies at the 17,700 and 17,610 levels.

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The Relative Strength Index (RSI) on the daily chart is 59.67. It remains neutral and shows no difference towards the price. The daily MACD is bullish and trades above the signal line. A spinning top happened on the candles. Such candles occur when there is a slight difference between the open and closing prices for the day.


The analysis for Friday remains very much along similar lines. The markets have seen tremendous growth in the form of notable technological improvements. Given this fact, it should not be a surprise to us if we see that the market is going through some strong consolidation in the near future. If Nifty consolidates, it will make the recent run-up more sustainable and healthy.

Also, as expected, no regional dominance was observed in the markets. There will be no special regional dominance in the coming season also. Participants are likely to remain broad as a whole. We recommend avoiding shorting the markets and using all downsides that result from consolidation moves to make selective purchases while cautiously protecting profits at higher levels.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of Equity Research.Asia and Chartwizard.AE (Chartwizard, FZE) and based in Vadodara. He can be contacted at [email protected])


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