Technical View: Nifty forms small bullish candle on weekly charts, prudent to remain neutral for now

Representative image | Source: Unsplash

Representative image | Source: Unsplash

Nifty50 gained strength to the tune of nine-tenth of a percent in the morning, but profit booking and volatility in last couple of hours of trade pulled the index lower on February 12. FMCG, metals and pharma stocks weighed down and banking & financials supported the index.

The index formed Doji kind of pattern on the daily charts, while there was small bullish candle formation on the weekly scale. Nifty is up 1.6 percent for the week. A Doji candle indicates there is some indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.

For the time being, it looks prudent to remain neutral, said Mazhar Mohammad of Chartviewindia who advised traders to wait for a breakout in either of the direction before initiating a trade.

India VIX was down by 4.33 percent from 23.04 to 22.04. Now, “VIX needs to cool down and hold below 21 levels for continuation in the ongoing momentum with higher market base,” said Chandan Taparia of Motilal Oswal.

The Nifty50 opened higher at 15,186.20 and touched an intraday high of 15,243.50, but turned volatile in last couple of hours of trade to hit a day’s low of 15,081. The index settled last trade at 15,163.30, down 10 points.

“Nifty50 appears to be on a consolidation mode as it signed off the week with a Doji kind of indecisive formation whereas on weekly charts a small bullish candle with a narrow range of 280 points was witnessed,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

“Interestingly Nifty is registering narrow ranges for last 5 trading sessions, out of which 4 proved to be indecisive formations. Hence, the said index may be positioning itself for a next leg of move in either of the directions which can be sharp based on the direction in which it breaks out,” he said.

According to him, if the index manages a close above 15,257 levels then initially it can expand the upswing towards 15,500 levels whereas a close below 15,000 levels shall usher in a sharp corrective downswing with eventual targets placed towards 14,500 levels.

Option data indicated that the Nifty could see an immediate trading range of 15,000 to 15,300 levels.

On option front, maximum Put open interest was seen at 14,000 followed by 14,500 strike while maximum Call open interest was at 15,500 followed by 16,000 strike. Put writing was seen at 14,500 and 15,100 strikes while Call writing was visible at 15,500 and 15,800 strike.

Bank Nifty opened flattish at 35,736.60 but gradually extended its positive move to hit a day’s high of 36,322.80 due to buying interest in selective private banks. It relatively outperformed the benchmark index and managed to close above 36,000 mark, up 356.80 points or 1 percent at 36,108.90.

It formed a bullish candle on daily scale while there was Doji formation on weekly scale.

“Bank Nifty has got in range between 35,500 to 36,600 from past six sessions as buying is witnessed at lower zones while hurdle is intact at higher levels. Now it has to hold above 36,000 mark to witness a move towards 36,500 – 36,600 while on the downside support is seen at 35,700 and 35,500,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On stocks front, bullish setup was seen in Motherson Sumi Systems, Container Corporation, Piramal Enterprise, M&M Financial, Muthoot Finance, ICICI Bank, Ramco Cement, Infosys, Axis Bank and HDFC while weakness was seen in ITC, Bosch, ONGC, Bharti Airtel, Titan and JSW Steel, he added.