Technical View: Nifty tops 16,000 to form large bullish candle, MACD gives a buy signal


The Nifty finally broke out of its almost 400 point range of the last two months in style as it zoomed past the psychologically important 16,000-mark to end at a record closing high on August 3. All key sectoral indices, barring metals, closed in the green.

Healthy June quarter earnings with management commentaries suggesting an improved demand environment, weaker impact of the second Covid wave and pick up in vaccinations lifted sentiment.

The index formed a large bullish candle on the daily charts as the closing was much higher than opening levels. The index can comfortably march towards 16,300 in the coming sessions, experts said.

“Finally bulls appear to have garnered courage to register a sustainable breakout above 33 sessions old trading range placed between 15,900–15,500 levels. Hence, based on the current consolidation breakout, this index shall have a comfortable target placed around 16,300 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at told Moneycontrol.

The Nifty50 started off the day at 15,951.55 and extended the uptrend as the day progressed to hit an intraday record high of 16,146.90 in the late trade. The index ended the session at a record closing high of 16,130.80, rising 245.60 points, or 1.55 percent.

One interesting thing visible on the charts was a buy signal triggered by the MACD indicator on the daily charts.

The Moving Average Convergence/Divergence indicator is basically a refinement of the two moving averages systems and measures the distance between the two moving average lines.

“Interestingly, this breakout also triggered a buy signal on daily MACD chart adding more credibility to the current leg of upswing. However, going forward, it remains critical for the Nifty to sustain above 15,900 levels as a breach of this level should ideally result in failure of the current breakout,” said Mohammad.

He advised traders to make use of mild weakness to go long by placing a stop below 15,900 and look for an initial target of 16,300.

India VIX moved up 7.4 percent from 12.80 to 13.74 levels after declining for the last three sessions. “Volatility spiked as Call writers got trapped and huge Call unwinding pressure was seen as it gave a range breakout,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the options front, maximum Put open interest was seen at 15,800 followed by 15,500 strike, while maximum Call open interest was seen at 16,000 followed by 15,800 strike. Call writing was seen at 16,400 then 16,500 strike, while meaningful Put writing was seen at 16,000 then 15,900 strike.

The data indicates that the upper resistance has increased for the Nifty and the broader trading range for the index could be between 15,800 and 16,400 levels for the coming sessions.

Banking index

The Bank Nifty opened flat at 34,660.75 but managed to hold 34,600 and gradually extended its move to hit the day’s high of 35,238.45.

It formed a big bullish candle on the daily scale and gained 497.40 points, or 1.43 percent, to close at 35,207.40 as buying interest was seen in most banking stocks.

“The Bank Nifty has given a range breakout on daily scale and managed to close above 35,000. Now, it has to hold above 35,000 to witness an upmove towards 35,500 then 35,750 levels while on the downside supports are seen at 34,750 then 34,500 levels,” said Taparia.

The Nifty futures closed positive with the gains of 1.51 percent at 16,149 levels. On the stocks front, a bullish setup was seen in Cummins India, Ashok Leyland, Havells, HDFC, Titan, UltraTech Cement, SBI, Godrej Consumer Products, Sun Pharma, Dabur, Bharti Airtel, Divis Labs, Dr Lal Path Labs and TCS. Weakness was seen in RBL Bank, PVR, Shriram Transport Finance, Exide Industries and LIC Housing Finance, Taparia said.