Technical View: Nifty forms Long White Day pattern, traders can create long positions

March 25
18:28 2020

The Nifty50, after early volatility, gained strength in late morning deals on March 25 and recouped more than half of Monday’s losses in the following sessions. The hope of an economic stimulus and a big repo rate cut, and US senators and the White House agreeing on a $ 2-trillion package lifted sentiment.

The index posted the third biggest single-day gain to close above 8,300 levels, with positive advance:decline ratio ahead of expiry of March derivative contracts. It formed a Long White Day pattern on daily charts, as the closing values were much higher than the opening.

This is the first time that the Nifty managed to show such strength in the current market turmoil that started in late February due to the fast-spreading coronavirus.

Experts say the positive trend to continue till the Nifty50 holds 7,600 levels on the closing basis.

Considering the strength, traders with a high-risk appetite are advised to make use of dip into the zone of 8,000–7,900 levels to create fresh long positions in the index, with a stop loss below 7,700 and look for bigger targets of 8,700.

The Nifty50 opened lower at 7,735.15 and hit the day’s low of 7,714.75 amid volatility but gradually gained strength and hit an intraday high of 8,376.75 in the last hour of the trade. It climbed 516.80 points or 6.62 percent to close at 8,317.85.

“For the first time in this strong downfall, the Nifty not only closed above its 5-day EMA (which is placed at 8,254) but also bridged the bearish gap present in the zone of 8,159 – 8,178 levels, hinting at a near-term strength. Therefore sustaining above 7,600 levels, the Nifty shall eventually embark on a decent pullback rally with initial targets present around 8,750 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said the near-term outlook would continue to remain positive unless the Nifty closes below 7,600 levels and on such a close downtrend would resume.

The Bank Nifty, too, witnessed sharp rally and formed a Long White Day pattern on daily charts. The index closed at 18,481, up 1,373.70 points or 8.03 percent.

“The Bank Nifty needs to surpass and sustain above 18,700 for the relief rally to materialise. The index is positioned perfectly for a sharp bear rally, expect levels of 22,000 plus once the recovery begins,” Amit Shah, Technical Research Analyst with Indiabulls Securities, told Moneycontrol.

“We have been recommending to avoid fresh short positions as the index remains highly oversold and a candidate for a very sharp bear rally,” he said.

He sees support for the Bank Nifty at 17,700-17,000, while the resistance is seen around 18,700-19,650.

The volatility also cooled off to around 77 levels, down 8 percent from 83.60 seen in the previous session.

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