Volatility vibes on weekly expiry!

Budget euphoria continued even on Wednesday with Nifty adding nearly 1 per cent and ending the session at fresh record highs.  

Nifty opened the session with a gap-up and in the first hour itself, it moved in a 200-point range; however, soon, bulls took charge and raced higher like a tracer bullet to log a fresh all-time high of 14,868.85 levels. But profit booking in the last leg of trade saw the index coming off its high point and closing below the 14,800 mark. The broader markets outperformed the frontline indices as Nifty Mid-cap and Small-cap surged 1.45 per cent and 1.22 per cent, respectively. FIIs continued their buying as they were net buyers to the tune of Rs 2,520.92 crore.  

The price action of the day formed a small body bullish candle with an upper and long lower shadow. It resembles a high wave candlestick pattern. Traditionally, this candlestick pattern is indicative of a market, in which, uncertainty and indecision prevail.  

We would term the strong momentum seen in the index of about 9 per cent from the lows as more of a breather after a strong move and less possibility of any major bearish implication of the above-mentioned candlestick pattern.    

On January 29, the index had breached its 50-DMA but now, the index is trading comfortably above its 50-DMA by 6.5 per cent. Nifty again moved 27 per cent above the 200-DMA. Interestingly, despite the euphoric movement seen in the index over the last three trading sessions, the momentum oscillators are completely presenting a different picture with the RSI showing a negative divergence against the price. The daily MACD is still in a sell mode.   

With weekly expiry on the cards and the put-call ratio (PCR) being at the higher side at 1.61, we could witness bouts of volatility. However, as long as Nifty trades above its previous all-time high of 14,754, it is a buy-on-dips market. While on the upside, the target is placed around 14,932 as the upper Bollinger band is present at these levels.