Technical View: Nifty forms bullish candle, rally can extend to 14,600-14,650
The Nifty50 consolidated in the first half but gained strength later in the day to close above 14,500 levels on April 13. The rally was led in part by short-covering and value buying after a steep fall in the previous session.
The Nifty50 opened higher at 14,364.90 but slipped to the intraday low of 14,274.90 amid consolidation. It gained strength in the second half to hit the day’s high of 14,528.90 and finally settled at 14,504.80, up 194 points or 1.36 percent.
The index formed a bullish candle on the daily chart as the closing was higher than the opening level. Experts expect the rally to continue up to 14,600-14,650 levels in the coming session.
It will be prudent to remain neutral on the index till some fresh signs of weakness emerge before creating fresh short side exposure, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
The market will remain closed on April 14 on Dr BR Ambedkar’s birth anniversary.
“It seems to be the day of consolidation on the bourses as bulls got a relief with the support of 100-day EMA whose value is placed around 14,280 levels. Though this rally resulted in a Harami kind of reversal formation, which should be positive for bulls in the near term, Monday’s sharp fall appears to have altered the medium-term picture in the favour of bears by making this kind of formations on lower time frame charts to remain vulnerable for sell off on rallies,” Mohammad said.
However, from the risk management perspective, one can look for a relief rally by placing a stop below 14,300 levels on the closing basis, he said.
In such a scenario if the Nifty sustains above 14,280 and strength continues then bounce shall initially expand into the 14,600–14,652 zone, he said.
On the other side, the volatility also fell sharply after rising over 16 percent in the previous session. India VIX declined by 11.04 percent from 22.99 to 20.46 levels.
On the options front, maximum Put open interest was seen at 14,000 followed by 14,500 strike, while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Call writing was seen at 14,900 then 14,800 strike, while minor Put writing was seen at 14,700 and 14,500 strike.
The data indicates that the Nifty can trade in a wide range of 14,000-14,800 in the coming sessions.
The Bank Nifty opened positive at 30,901.80 and moved northwards since its opening levels. After underperforming for 30 sessions, the banking index outperformed the broader market. It surpassed its previous day’s high and closed with gains of 979.60 points, or 3.18 percent, at 31,771.60.
The index formed a bullish candle on the daily scale and negated its lower highs-lower low formation of the last two sessions. “Now it has to cross and hold above 31,500 for an upmove towards 32,250 and 32,750, while on the downside, support can be seen placed at 31,000 and 30,500 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
On the stock front, a bullish setup was seen in SAIL, Jindal Steel, Motherson Sumi, Maruti Suzuki, GAIL India, ONGC, JSW Steel, HDFC, Hindalco, Marico, ICICI Prudential, Glenmark, NMDC, Tata Steel, Max Financial Services and Bharti Airtel. Weakness was seen in Mindtree, TCS, Wipro, Colgate Palmolive and Torrent Power, he added.