Nifty50 – 14,631.10, lost 0.40% last month ( April 2021

Last month, the index traded in a range-bound zone, almost in line with our expectations as published in our previous monthly and weekly reports.

In April, the index failed to chase its previous two months' high and turned volatile in the range of 15,044–14,151. The market action in the month formed a Doji candle, with a lower-high and lower-low price formation, and the index settled with a nominal loss of 0.40%. The momentum indicator RSI on the monthly chart was almost flat, and it was hovering around 69–67 levels for the last two months, with a neutral bias from a long-term perspective. Likewise, other technical indicators also suggest a neutral bias from a long-term perspective.

On the weekly chart, the index is trading along an upward sloping trendline from the recent multi-year low and trending above all key moving averages. Also, a detailed analysis of the weekly chart indicates the index is volatile and choppy for the last ten weeks, and it has formed multiple DOJI candles in a row on the weekly chart. The weekly RSI is now trending in a negative slope, with a lower trough and peak, and has now breached the trendline connecting the high of August 2018 and January 2020. Additionally, RSI is also now trending below this trendline, indicating a negative bias. Another trend following indicator, MACD, is trending in a negative slope with a negative crossover. However, weekly MACD is still trending in the positive zone.

Likewise, the index has been trading in a downward sloping parallel trendline on the daily chart and is currently trending below its 21- and 50-DMA. An analysis of the daily price action over the last three months indicates the index has formed multiple bearish candlestick patterns on every upward bounce, and every upward bounce has sold off. Though in the last week of April, the index tried to cross its downward sloping trendline but failed to hold above 14,900. And the index once again approached the 100-DMA, which is currently placed around 14,486. Hence, we expect the index to turn more negative, and a fresh downside window may open toward 13,700–13,600 levels once the index decisively breaches these levels.

On the derivative data front, for the monthly contracts expiring May 27, the PCR stands at 1.52. Further, monthly option data indicates maximum Call OI stands at 15,000 strikes, which are 35.45 lakh contracts, followed by 21.71 lakh contracts for 15,500 strikes. While the maximum Put OI stands at 14,000 strikes, followed by 13,500, which are 46.58 lakh contracts and 39.73 lakhs contracts, respectively. Further, the strike-specific analysis of Call-Put OI indicates the index may face strong resistance around 15,000 and has strong support around 14,000 followed by 13,500.

Further, as per the O’Neil Methodology of the market direction, the current market is in an “Confirmed Uptrend” with two distribution days in the last 25 trading sessions.


All the above-mentioned multi-timeframe technical parameters, along with derivatives data and O’Neil Methodology
of market direction, suggest a sideways kind of move in the coming month with negative bias. The last three month's price action suggests the index is facing strong resistance around 14,900–15,000. Likewise, on the downside, it has support around 14,200–14,100.

Also, the index is still trending in the sideways zone with a negative bias, but the study of various technical indicators, along with market psychology, indicates bulls are losing their grips, and a fall below the 100-DMA may open a fresh downside window toward 14,000 and 13,700–13,600. In short, our bias would remain negative for the current ongoing month until the index is trending below 14,800–14,900. However, it may turn bullish if the index will cross and hold above 14,800- 14,900.

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Author's Bio: 

MarketSmith India - Stock Market Analysis - Stock Invest Advisory platform.