Dalal Street Week Ahead: Stay cautious of low levels of VIX which leave market exposed to profit-taking bouts

economictimes.indiatimes.com:

It was the third week in a row that the markets extended their gains; the NIFTY had staged a breakout when it crossed above the 18880 levels. This has resulted in the NIFTY closing at yet another lifetime high. This has taken the markets into a mildly overbought zone; however, in the process, the index has raised their supports higher.

The trading range remained modest; NIFTY oscillated in a 268.25 points range in the past five sessions. While extending the move higher as mentioned, the headline index closed with a net gain of 232.70 points (+1.20%) on a weekly basis. Going by the derivatives data, there is a high accumulation of the OI near 19800-19900 levels.

Going by this data, one can expect the markets to find stiff resistance near that zone over the coming days even if the current uptrend is to extend itself. Volatility also dropped; the INDIAVIX came off by 7.37% to 10.38 on a weekly basis. This is something that can push the markets into some consolidation; these low values of VIX have the potential to keep the markets exposed to violent profit-taking bouts from current levels.

The coming week is again set to see a quiet start to the week; the volatility is likely to increase and the levels of 19700 and 19865 can act as resistance points. The support levels come in at 19310 and 19200. The weekly RSI is 71.87; it has marked a fresh 14-period high and now remains mildly overbought.

The MACD is bullish and stays above the signal line. The widening Histogram shows accelerating momentum in the current uptrend. All in all, the overall technical structure of the markets remains buoyant and there is nothing to suggest based on which we can say that the markets may be staring at any major correction.