Technical View: Nifty forms bullish candle, 11,250 crucial for further upside
The Nifty finally closed in the green as bulls made a strong came back on Dalal Street on October 9. A 5 percent increase in dearness allowance for government employees and pensioners and short covering in beaten down stocks lifted market sentiment.
The index closed above 11,300 and formed a large bullish candle on the daily charts after seeing a bearish candle six days in a row. It negated the formation of lower top-lower bottom on lower time frame and also respected to its 61.8 percent retracement of the entire up move from 10,762 to 11,695 levels.
The strong breakout indicates that the index can reclaim 11,400, if it holds 11,250 on closing basis in the coming sessions, experts say.
The Nifty gained strength in late morning deals and extended the rally as the day progressed. The index hit an intraday high of 11,321.60 in the late trade and closed 186.90 points, or 1.68 percent, higher at 11,313.30.
Option data suggests a wider trading range for the Nifty at around 11,000-11,600 levels.
Maximum put open interest is at 11,000 followed by 11,200 strike, while maximum call open interest is at 11,200 followed by 11,500 strike. Put writing was seen at 10,600 followed by 11,200 strike, whereas call writing was seen at 11,200 then 11,300 strike.
“The Nifty50 appears to have strongly bounced back after testing its critical support level of 11,100 levels and managed to decisively close above its 50- and 200-day moving averages. Interestingly, at Wednesday’s low of 11,090 levels, the Nifty retraced 62 percent where corrections usually tend to end and hence as long as the Nifty sustains above the said level, one can retain a positive bias and look for initial targets of 11,400 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said after the strong upmove, modified twin momentum oscillators generated a buy signal. He expects this positive bias to stay for a couple of trading sessions.
If the Nifty manages to clear 11,400, the rally may get extended up to 11,554 levels, Mohammad said.
He advised traders to either buy a breakout on a close above 11,400 or make use of dips, preferably towards 11,220, to initiate fresh long positions, with a stop loss below 11,100 on closing basis.
The Bank Nifty opened positive and witnessed sustained buying interest throughout the day. It retested its previous breakout zone and bounced back sharply by gaining more than 1,000 points in a single session.
It also negated its lower highs formation after seven trading sessions and formed a morning star candle stick on the daily scale, which implies that bulls are ready to move prices at higher levels. The index closed at 28,785.85, up 3.67 percent.
“Now till the index holds above 28,250 levels, it could extend its gains towards 29,000 then 29,250, while on the downside, supports are seen at 28,500 then 28,250 levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.
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