Technical View: Nifty forms bullish candle on weekly scale, 12,300 crucial next week
The Nifty, which opened lower, remained volatile through the session and closed flat on January 17 as traders closely watched third-quarter earnings and eagerly await Union Budget on February 1.
The index managed to close above 12,350 and formed a small bullish candle on daily charts, as the closing was higher than the opening tick.
For the week, it remained lacklustre and traded in a range of more than 100 points, forming a bullish candle on the weekly scale.
Experts say the sideways trade will continue in the coming week and traders will closely watch the crucial 12,300-mark as it will be key to further direction, on either side.
The volatility index India VIX fell marginally by 0.37 percent to 14.12.
The Nifty, after opening lower at 12,328.40, hit an intraday low of 12,321.40 but recovered in the morning trade itself to hit the day’s high of 12,385.45. The index closed 3.10 points lower at 12,352.40.
“Weakness appears to be slowly creeping into the index as Nifty50 remained listless for the entire week with a narrow range of 111 points, which depicted a small bullish candle. Albeit Friday’s trade remained slightly positively biased on the intraday basis, the last five sessions of the trading range are almost tepid, hinting at fading momentum,” Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said as some weekly momentum oscillators generated sell signals, the Nifty might come under selling pressure on a strong close below 12,300 in the next couple of sessions.
In such a scenario, there is a high possibility that near-term trend may turn bearish with initial targets placed around 12,050, he said.
In contrast, a stable move above 12,300 shall at least ensure sideways consolidation, but without any proper trading opportunity on the long side, Mohammad said. “However, a strong close above 12,390 can extend the rally towards 12,500 kinds of levels,” he said.
For the time, traders should make use of weakness below 12,300 to create short positions rather than buying dips.
The options data indicates that the Nifty could trade in the 12,000- 12,500 range in the coming sessions.
On the options front, maximum Put open interest was seen at 12,000 followed by 12,200 strike, while maximum Call open interest was at 12,500 followed by 12,400 strike. Marginal Call unwinding was seen at immediate strike while some Put writing was seen at 12,300 strike.
The Bank Nifty started the session on a negative note and consolidated around its support of 31,500 throughout the day. Eventually, it concluded the session around the opening price and thus formed a Doji candle on the daily chart. The index was down 0.83 percent to close at 31,590.70.
The banking index underperformed the benchmark indices last week and corrected by 1.58 percent to form a red-body candle on the weekly chart.
“At the current juncture, the Nifty Bank is hovering around its bullish gap of 31,451-31,667 levels. Now, it has to continue to hold above 31,500 level to witness an upmove towards 32,000 then 32,500-32,600 levels while major support below 31,500 is placed at 30,900–31,000 levels,” Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services, said.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.