Technical View: Nifty forms bullish candle for second day in a row, profit booking likely

March 12
17:30 2019

The Nifty50 after strong opening continued its run throughout the session and closed at highest levels in last six months on Tuesday. Strong global cues and FII flow lifted sentiment.

The index closed above 11,300 levels and formed bullish candle on the daily charts for second consecutive session.

The index has managed to cross 11,118 and 11,180 zones in last two sessions and supports are gradually shifting higher with the higher pace of buying momentum, but as it entered into overbought zone, there could be some profit booking in coming sessions, experts said.

The Nifty50 after opening sharply higher at 11,231.35 gained more strength as the day progressed and hit an intraday high of 11,320.40. The index closed 133.20 points or 1.19 percent higher at 11,301.20, the highest level since September 17, 2018.

“Nifty50 registered yet another day of gap up opening with strong bullish candle for second session in a row to continue its march towards northern direction as it cleared near term critical hurdles one after the other. Once a consolidation breakout happens it becomes quite natural to register this kind of sustainable upswings for couple of sessions,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said, however, as Nifty50 is nearing its logical resistance levels on the back of strong rally it may undergo some profit booking as it nears 11,400 levels.

Besides, this sharp upmove appears to have brought the indices into overbought zone on lower time frame charts making a case for some cooling off in the near term, he added.

On the down sides, Tuesday’s gap zone of 11,227–11,180 can be considered as critical support going forward below which short term trend shall come under pressure, according to Mazhar.

For the time being, he advised traders to consider booking profits as Nifty heads towards 11,400 levels.

India VIX closed higher after the declines of last seven trading sessions. It was moved up by 1.33 percent to 15.09 levels.

On Option front, maximum Put open interest (OI) is at 11,000 followed by 10,700 strike while maximum Call OI is at 11,400 followed by 11,500 strike.

Meaningful Put writing is at 11,200 followed by 11,300 strike while Call unwinding is at all the immediate strikes with minor Call writing at 11,350 strike.

Experts said Option band signifies a shift in higher trading range in between 11,150 to 11,450 zones.

“Nifty index surpassed its resistance trend line of the sideways channel and closed above the same with the formation of bullish candle on daily scale which indicates bullish bias. Now it has to continue to hold above 11,200 zone to extend its gains towards 11,400-11,450 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Overall setup and momentum is positive and a follow up could continue its extended momentum while immediate support exists at 11,200 then 11,118 zones, he added.

Bank Nifty rallied by more than 450 points and made a new life-time high towards 28,488 mark by crossing previous high of 28,388 zones.

It closed at 28,443.70, up 477.05 points and formed a bullish candle on daily scale which indicates that bulls are holding tight grip in the market with fresh breakout.

“Now it has to continue to hold above 28,150 zones to extend its momentum towards new life time high of 28,750-28,800 zones while on the downside major support exists at 28,000 then 27,750 levels,” Chandan said.

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