Technical View: Nifty forms bullish candle on weekly charts, 15,380 crucial for further upside
The Nifty50 made a strong start to the June series, hitting a fresh high on a fall in the dollar index and a decline in coronavirus cases in the country. Reliance Industries was the leading contributor to the rally followed by HDFC group stocks.
The index extended gains for the sixth consecutive session and ended at a record closing high to form a Doji pattern on the daily charts as the closing was near opening levels. For the week, the index formed a bullish candle as it gained 1.7 percent.
A Doji candle indicates indecisiveness among the bulls and the bears and also that bounces were being sold in the absence of follow-up buying interest.
Experts say 15,380 will be crucial for further upside in coming sessions.
Considering indecisive formation and weak market breadth, traders should remain neutral on the long side, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia said. Intraday traders can consider going short below 15,380 and look for a modest target of 15,270, he said.
The sharp fall in volatility also helped the equity market. India VIX fell by 12.59 percent from 19.91 to 17.40 levels.
“India VIX is at lowest levels of last 65 weeks since February 2020 along with its biggest single-day drop since November 25, 2020. Falling VIX is likely to extend the bullish market momentum towards new high territory,” said Chandan Taparia of Motilal Oswal.
The Nifty50 opened higher at 15,421.20 and remained strong throughout the session to hit an intraday record high of 15,469.65. The index closed at 15,435.70, up 97.80 points.
“… the index by the end of the day registered an indecisive formation called Doji. Moreover, today’s index rally seems to be on the back of RIL alone which added 90 points to the kitty of Nifty gains, whereas market breadth decisively skewed in favour of bears, hinting that broader market is cautious and made use of this rally to book profits,” Mohammad said.
To retain positive bias in the next session, the Nifty must sustain above 15,394–15,384, the minor bullish gap zone of May 28, he said.
If the Nifty slides below 15,380, it can slip into corrective or a consolidation phase with initial targets placed around 15,250 – 15,200, Mohammad said.
The options data indicates a trading range of 15,000- 15,800 for the Nifty in the coming sessions.
Since it is the beginning of new series, options data is scattered at different strikes. On the options front, the maximum Put open interest is at 14,000 followed by 14,500 strike, while maximum Call open interest is at 16,000 followed by 15,500 strike. Call writing is at 16,000 and 15,800 strike, while Put writing is at 15,000 then 14,500 strike.
The Bank Nifty opened gap up at 35,345.65 and touched a high of 35,436 but couldn’t hold to it and witnessed volatility during the day. It gave the highest daily close of the last 49 sessions and settled with marginal gains of 46.30 points at 35,141.40.
The index formed a bearish candle on the daily scale with long lower shadow, as the closing was lower than opening levels.
“It has to hold above 35,000 to witness an upmove towards 35,500 and 36,000, while on the downside, support is seen at 34,750 and 34,500 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, a bullish setup was seen in Reliance Industries, L&T Finance Holdings, Canara Bank, Grasim, ICICI Prudential Life, Adani Ports, PFC, RBL Bank, M&M, IndiGo, REC, IDFC First Bank, Mindtree, Colgate Palmolive and McDowell. Weakness was seen in TVS Motor, Sun Pharma, Bharat Electronics, Dr Reddy’s Labs, Tata Power and NTPC.
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