The Nifty50 traded higher for most of the session after a volatile start and need above the 15,300-mark, giving the highest daily close of the last 65 sessions on May 26.
The rally was driven by IT, financials, select auto and pharma stocks. The index formed a bullish candle that resembled Hanging Man pattern formation on the charts. Experts expect volatility as May 27 is the monthly derivative contracts expiry session.
A Hanging Man is a bearish reversal candlestick pattern that is usually formed at the end of an uptrend or at the top. In a perfect ‘Hanging Man’ pattern, there will be a small upper shadow or no upper shadow at all, a small body and a long lower shadow.
Considering the monthly expiry, traders should remain neutral on the index by shifting their focus towards stock-specific opportunities, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia said.
India VIX moved up by 10.79 percent from 18.84 to 20.87 levels. “India VIX needs to hold below 20 zones to extend the bullish market momentum towards new lifetime territory,” said Chandan Taparia of Motilal Oswal.
The Nifty50 opened higher at 15,257 and turned volatile to hit the day’s low of 15,194.95 in early trade but immediately gained momentum to hit an intraday high of 15,319.90. The index signed off the session at 15,301.45, up 0.61 percent.
“Albeit test of new highs looks inevitable bulls appear to be developing some kind of discomfort, as they are inching upwards, which is revealed in the pattern formations of past three trading sessions including today’s Hanging Man kind of formation,” Mohammad said.
Moreover, “this kind of indecisive formations are getting registered around near-term resistance of 15,336 levels that too when some of the momentum oscillators on lower time frame charts (are) approaching overbought zones. Hence, unless the Nifty clears this hurdle the trend shall continue to remain dicey,” he said.
Weakness can be expected if the Nifty closes below 15,190 in the next session, Mohammad said.
On the options front, maximum Put open interest is at 15,200 followed by 15,000 strike while maximum Call open interest is at 15,500 followed by 15,400 strike. Call writing is at 15,400 and 15,550 strike, while Put writing is at 15,300 then 15,200 strike. This option data suggests a trading range for the Nifty could be 15,150 to 15,450 levels.
The Bank Nifty opened positive at 34,757 but remained muted for the most part of the day. The banking index lacked strength but did manage to close above the previous day’s low.
The index formed a bearish Inside Bar pattern on a daily scale and settled the day on a flattish note. “It has to hold above 34,500 levels to witness an upmove towards 35,000 and 35,250, while on the downside, support is seen at 34, 250 and 34,000 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, “a bullish setup was seen in Bajaj Finserv, DLF, Bajaj Finance, TVS Motor, Infosys, Pidilite Industries, Jubilant Foodworks, Mindtree, Wipro, UPL, Maruti, Tech Mahindra, HDFC, L&T, TCS, Berger Paint, Page Industries, Sun Pharma and Cipla. Weakness was seen in Jindal Steel, SAIL, Power Grid, Vedanta, Cholamandalam Investment, ICICI Prudential, Coal India and M&M Financial, he added.
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