Technical View: Breakout! Nifty50 forms strong bullish candle; next target seen at 11,000

July 10
17:29 2018

Bulls maintained their power at Dalal Street for third consecutive session on Tuesday as the Nifty50 after a strong breakout above 10,900 levels in morning extended rally in later part of the session to reclaim 10,956.90 levels intraday.

The index also crossed Karnataka Election Result day’s high of 10,929 and closed at five-month high, forming a solid Bullish candle on the daily charts.

The 50-share NSE Nifty which opened at 10,902.75 rallied further as the day progressed and hit an intraday high of 10,956.90, before closing 94.40 points or 0.87 percent higher at 10,947.30, the highest closing level since February 1, 2018.

After a rangebound trade for around two months, the strong breakout indicated that the Nifty could be heading towards its earlier all-time highs of 11,171 touched on January 29, experts said.

“Finally Nifty50 appears to have registered a decisive breakout there by shrugging off the last 8 weeks of rangebound behaviour as it registered a solid bullish candle with a strong gap up opening,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

With this decisive breakout, after a pause of two months, Nifty50 can be heading to retest its life time highs placed around 11,171 levels registered in last February, he said. “On the downsides Tuesday’s gap zone of 10,876–10,860 shall be deemed to be a sacrosanct support and one can remain bullish as long as Nifty50 sustains above the said gap area.”

He said the current upswing in markets shall get strengthened further going forward as short covering rally may kick in with indices trading above all critical hurdles on the way to their life time highs. “Hence, traders are advised to consider dips as fresh buying opportunities and look for targers of 11,170 in next couple of months.”

Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan said the index also managed to surpass 78.6 percent retracement of the fall from 11,171 to 9,951 on closing basis. “The key Fibonacci level was placed at 10,910. Thus the bulls seem to be pushing the index for higher levels.”

He said the daily upper Bollinger Band that had become flat over last several sessions has now started expansion along with the price action. “Hence the index now looks set to test its weekly upper Bollinger Band, which is close to 11,100. On the other hand, the level of 10,800 shall act as a crucial support.”

India VIX closed flattish at 12.39 levels. VIX has been falling down from last five trading sessions and lower volatility indicates bullish stance of market till it remains below 13.50 zones.

On the option front, maximum Put open interest (OI) was at 10,600 followed by 10,700 strike while maximum Call OI was at 11,000 followed by 10,800 strike. Significant Put writing was seen at 10,900 and 10,800 strikes while Call unwinding was seen at all the immediate strikes.

Option band signifies an immediate trading range in between 10,880 to 11,000 zones, experts said.

“The Nifty index continued its positive momentum and registered a highest daily close of last five months near to 10950 zones. It has surpassed its falling supply trend line by connecting swing highs of 11,171, 10,929, 10,837 and 10,816 levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.

He said supports are gradually shifting higher and till it holds above 10,880 zones, momentum could extend towards 11,000 then life time high of 11,171 zones. “On the downside major support exists at 10,835 then 10,770 zones.”

Bank Nifty managed to hold above 26,750 zones and headed towards 26,939 zones. “It formed a Bullish candle while supports and resistances are gradually shifting higher. Now it has to continue to hold above 26,750 zones to extend its move towards 27,100-27,165 zones,” Taparia said.

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