Technical View: Nifty forms bullish candle, experts say wait for breakout above 15k to initiate longs


The Nifty50 snapped its three-day losing streak and recouped all losses in a single session to close above 14,900 on May 17, backed by banks, metals and auto stocks as well as a drop in coronavirus infections.

The index opened higher at 14,756.25 and extended gains to hit an intraday high of 14,938. The index settled at 14,923.20, up 245.40 points or 1.67 percent.

The index formed a bullish candle on the daily charts as the closing was higher than opening levels. The index needs to close above 15,000 for a strong uptrend, say experts.

Considering the larger trend is sideways, traders should wait for a breakout above 15,000 before initiating long positions, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.

The Nifty50 appears to be on the verge of a breakout as it erased preceding three trading sessions of losses with a single bullish candle on May 17, he said. “However, the larger trend continues to remain sideways unless Nifty registers a strong breakout above 15,000 levels on a closing basis,” Mohammad said.

The price action of the last 50 trading sessions evolved into some sort of descending channel with valid touch points. As the Nifty is trading close to the upper boundary of the channel, a close above 15,000 levels can facilitate a sustainable upmove with bigger targets, he said.

India VIX fell 3.27 percent from 20.26 to 19.60, the lowest in 2021, which experts say is a positive sign for the market. If it sustains below the same, it could support bulls.

On the options front, maximum Put open interest was seen at 14,000 followed by 13,500 strike, while maximum Call open interest was seen at 15,000 followed by 14,800 strike. Call writing was seen at 15,300 and 15,400 strike with unwinding at 15,000, while Put writing was seen at 14,800 then 14,700 strike. The data suggests a higher shift in the wider trading range of 14,600- 15,200 for the Nifty.

The Bank Nifty opened gap up at 32,437.85 and moved above 33,500 to hit the day’s high of 33,506.90. Bulls ruled the banking stocks and the index gave its highest daily close in the last 10 sessions.

It surpassed its previous hurdles, set to cross a falling supply trend line and sustained at higher zones. It outperformed the broader market and closed 1,289.80 points, or 4.01 percent, higher at 33,459.30, forming a strong bullish candle.

“The Bank Nifty negated its formation of lower top-lower bottom of the last three sessions. Now it has to hold above 33,333 to witness an upmove towards 34,000 and 34,250 levels, while on the downside, support is seen at 33,000 and 32,750 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the stock front, a bullish setup was seen in Balkrishna Industries, IndusInd Bank, SBI, BHEL, RBL Bank, Motherson Sumi, Shriram Transport Finance, ICICI Bank, Jindal Steel & Power, Siemens, HDFC Bank, UPL, UltraTech Cement, Bajaj Finserv, Bajaj Finance, Colgate Palmolive and LIC Housing Finance. Weakness was seen in Cipla, L&T, Cadila Healthcare and HPCL, he added.