Technical View: Nifty forms bullish candle, experts say traders can book profits
The Nifty extended gains for a third consecutive session to close in on the 16,300-mark as it ended at another high on August 4, backed by upbeat global cues and strong buying in banking & financial sector.
The index formed a bullish candle on the daily charts as the closing was higher than the opening tick. Experts advised traders to turn cautious, given the sharp rally and profit-booking in broader markets.
Considering that the broader market saw wide profit-booking, traders should book profits and remain neutral for the day, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty opened strong at 16,195.25 and remained highly volatile with a positive bias after hitting an intraday high of 16,290.20. The index ended 128 points higher at 16,258.
“…broader markets witnessed strong profit-booking as the advance-decline ratio decisively remained skewed in favour of the bears with two stocks declining for every single stock which closed in the positive territory,” Mohammad said.
Moreover, 32 out of 50 the Nifty stocks closed in negative territory, indicating that main market gauges were single-handedly lifted by financials, he said.
Hence, the Nifty has to sustain above the day’s gap zone of 16,176– 16,146 to retain positive bias, he said.
“If the bulls manage to defend the said support zone, then a higher target towards 16,700 can be expected. However, a close below 16,146 shall trigger short-term profit-booking,” Mohammad said.
India VIX fell 3.91 percent from 13.74 to 13.21 levels. “Stability in volatility indicates that bulls are holding the market to cheer the fresh momentum,” 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 16,000 strike, while maximum Call open interest was seen at 16,500 followed by 16,000 strike. Call writing was seen at 16,500 then 16,600 strike, while meaningful Put writing was seen at 16,200 then 16,100 strike.
Options data indicated that a broader trading range for the Nifty has been shifted upwards to 16,000 to 16,600 for the coming sessions.
Broader markets witnessed profit-booking, as the Nifty midcap 100 index was down 1.19 percent and smallcap 1.01 percent.
The Bank Nifty opened gap-up at 35,388.15 and hit an intraday high of 36,219.80 after its range breakout. It surpassed its resistance zones and closed above 36,000 gaining 820.65 points at 36,028.10.
The index formed a big bullish candle on the daily scale and formed higher highs from the third session. “The Bank Nifty has to hold above 36,000 levels to witness an upmove towards 36,250 then 36,500 levels, while on the downside, supports are seen at 35,750 then 35,500,” said Taparia.
On the stock front, a bullish setup was seen in HDFC, Kotak Mahindra Bank, ICICI Bank, SBI, HDFC Bank, Piramal Enterprises, Axis Bank, Escorts, Siemens, Reliance Industries and JSW Steel. Weakness was seen in Indus Tower, Indiabulls Housing Finance, IDFCFirst Bank, RBL Bank, Bharat Electronics, Petronet LNG, PNB, BHEL, Indraprastha Gas, Shriram Transport Finance and TVS Motor, he said.
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