Technical View: Nifty forms bullish candle, MACD gives a buy signal but tread with caution


The Nifty50 after gained strength after initial hours of volatility to hit a new high on February 4 despite weak Asian cues. All sectors, barring IT and pharma, supported the rally.

It opened flat at 14,789.05 and hit the day’s low of 14,714.75 amid volatility but gained strength later to extend the rally to hit a life-time high of 14,913.70. The index gained 105.70 points to end at a record closing high of 14,895.70.

t was the fourth straight session of gain, backed by FII inflow and formed a bullish candle on the daily charts as the closing was higher than the opening levels.

One interesting thing was a buy signal triggered by the MACD indicator on the daily charts but experts advised caution, considering the one-sided rally seen in the last four consecutive sessions.

The Moving Average Convergence/Divergence indicator is a refinement of the two moving averages systems and measures the distance between the two lines.

India VIX was down by 2.60 percent from 23.74 to 23.12  but it needs to cool down below the 20-mark for the ongoing momentum to continue with a higher market base, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Four days “of rally from the lows of 13,596 levels appears to have dragged some of the momentum oscillators into the overbought zone and hence caution is warranted around these levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

“Though daily MACD indicator turned bullish with a buy signal, it has no value addition at this juncture, as the market already rallied around 1,500 points,” he said.

According to him, if the bulls manage to push the index beyond 14,907 then intraday rally shall be expected to initially expand towards the resistance point of 14,988 levels placed on lower time-frame charts and a strong move beyond this hurdle can take the Nifty towards 15,200 levels.

“Though fresh long positions are not advisable, bravehearts who are already long are advised to maintain a tight stop below 14,714 levels on closing basis and ride the rally,” Mazhar said.

On the options front, maximum Put open interest was at 14,000 followed by 13,500 strike, while maximum Call open interest was at 15,000 followed by 15,500 strike. Put writing was seen at 14,000 and 14,700 strikes while some Call writing was visible at 14,900 and 15,500 strikes.

The options data suggested that the Nifty could see a wider trading range of 14,500 to 15,200 levels in the coming sessions.

The Bank Nifty opened negative at 34,548.90 but managed to hold support of 34,250 and bullish momentum in all the banking stocks drove the index to hit a record high of 35,413.15 to close with gains of 586.40 points at 35,344.80. The index formed a bullish candle on the daily scale and continued its higher top-higher bottom from the last five sessions.

“The Bank Nifty has to hold 35,000 to witness an upmove towards 35,500 and 36,000 zone, while on the downside, support is seen at 34,500 and then 34,250 levels,” Taparia said.

A bullish setup was seen in Jubilant Foodworks, SBI, Balkrishna Industries, Sun TV Network, Bank of Baroda, BHEL, Canara Bank, ITC, DLF, Bajaj Finance, Federal Bank, M&M, Container Corporation, Cummins India, Siemens, Kotak Mahindra Bank, Max Financial Services, REC and TVS Motor. Weakness was seen in Asian Paints, UPL, Tech Mahindra and TCS, he added.