Technical View: Nifty forms bullish candle; consolidation likely before hitting fresh record high

August 03
18:29 2018

The Nifty50 after opening sharply higher extended rally as the day progressed and recouped all losses seen in the previous session to end at fresh record closing high on Friday.

The index formed strong bullish candle on the daily candlestick charts. The renewed trade war tensions between world’s largest economies US and China spooked the market on Thursday.

The rally today was led by value buying after recent consolidation. All sectoral indices ended in the green with Bank, Financial Services, FMCG and Metal indices rising over a percent each.

The broader markets also participated in the rally with the Nifty Midcap index climbing a percent.

The Nifty50 after opening on a strong note at 11,297.80 rallied further to hit an intraday high of 11,368 and ended at record closing high of 11,360.80, up 116.10 points.

The sharp rebound after correction indicated the market may be heading for higher levels at around 11,450-11,500 levels but the may see some consolidation before moving towards these levels, experts said.

“Nifty50 strongly recoiled to sign off the weekend session in style with a strong bull candle suggesting that Thursday’s dramatic fall was one off due to trade related tensions at the global front,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said with this strong and new life time high on closing price basis bulls appears to have reinstated the momentum in the markets and looks to be heading towards its critical resistance zone placed between 11,480–11,500 levels on long term charts.

Unless Nifty50 registers a fresh breakout above this resistance point a fresh leg of upswing shall not be expected and this uptrend shall remain intact as long as Nifty50 stays above 11,230 levels which can be regarded as a stop for all long positions, he feels.

Hence, it looks prudent for traders to book some profits as we head towards the said resistance zone, Mazhar said.

The Nifty50 has again scaled above its crucial hourly moving averages. In terms of the wave structure, the minor degree dip over last couple of sessions was a fourth wave correction.

“This means to complete an Impulse structure on the upside a leg on the upside looks imminent. Once Nifty crosses the recent high of 11,390, it can stretch towards 11,450 & 11,640,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan told Moneycontrol.

He said a fourth wave correction, however, is typically a sideways correction. “Hence a possibility of consolidation cannot be ruled out before the index crosses the level of 11,390.

On the downside, 11,250-11,200 shall continue to act as a key support zone for the index, he feels.

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