Technical View: Nifty forms small bullish candle, trend expected to remain directionless
The Nifty traded higher and remained range-bound amid volatility throughout the session on July 29, forming a small bullish candle on the daily charts. Metals led the charge with a 5 percent rally, followed by IT with 1.4 percent gains. Select banking and financials also gained but the selling pressure in FMCG and select auto stocks limited upside.
The bullish candle indicates that the closing was higher than the opening tick . Experts expect range-bound trade to continue unless the index breaks 15,600 on the downside and 15,900 on the upside.
India VIX fell 5.44 percent from 13.69 to 12.94 levels. The decline in the volatility after the roller coaster ride of the last session has again given a chance to the bulls.
Traders should remain neutral till the Nifty registers a strong breakout in either direction, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty50 hit an intraday high of 15,817.35 and a low of 15,737.80 after opening higher at 15,762.70. The index rose 69.10 points to close at 15,778.50.
“The Nifty50 continued its range-bound move as the trading range on expiry session remained somewhat narrower with 79 points which resulted in a small bullish candle,” Mohammad said.
The trend still remains sideways without any directional clue. Typically, in sideways phases, moving averages will also fail to provide any clue as the index often crisscrosses these averages without any utility to forecast, he said.
According to him, 15,600 is the level to watch out for on the downside. A breach of it can lead to a sharp corrective downswing.
Similarly, “unless 15,900 is decisively cleared on the upside, a sustainable upmove can’t be witnessed. However, weakness in the next session can be expected if the index closes below 15,737 levels, which may initially lead to the test of 50-day simple moving average whose value is placed around 15,670,” he said. Some stability beyond 15,820 can, however, strengthen the intraday strength towards 15,880–15,900.
Since it is the beginning of a new series and the options data is scattered at various far strikes. Maximum Put open interest was seen at 15,000 followed by 15,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,800 strike.
The data indicates that the Nifty50 can see a broader trading range of 15,500-16,000.
The Bank Nifty opened positive at 34,740.30 and while it remained under pressure in the first half of the session, the later half saw recovery and it closed with gains of 158.60 points at 34,691.50.
Banking stocks moved in a lacklustre way and have been underperforming the broader market for the last two sessions. The index It formed a small-bodied candle with a long lower shadow, which indicates that declines are being bought and follow-up is still missing at higher zones.
“The Bank Nifty has to hold above 34,750 levels to move up towards 35,000 and 35,250 levels while on the downside support is seen at 34,500 and 34,250 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
On the stock front, he said bullish setup was seen in Hindalco, NALCO, Tata Steel, Vedanta, SAIL, NMDC, Bajaj Finserv, SBI, JSW Steel, Mindtree, DLF, Bajaj Finance, Jubilant Foodworks, Dr Lal PathLabs, Havells and Infosys.
Weakness was seen in Colgate Palmolive, LIC Housing Finance, TVS Motor Company, Maruti, Bajaj Auto, Amara Raja Batteries, ITC, Cipla, Kotak Mahindra Bank and HUL, he added.