The Nifty snapped its four-day losing streak and closed a volatile session with moderate gains on October 25, as buying interest continued in banking and financials.
The Nifty touched an intraday high of 18,241.40 after opening sharply higher at 18,229.50. It touched the day’s low of 17,968.50 but closed at 18,125.40, up 10.50 points.
The index strongly defended the 18,000-mark and formed a bearish candle that resembled the Hammer pattern on the daily charts.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and a long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located.
India VIX rose marginally by 0.34 percent from 17.54 to 17.61 levels.
The Nifty seems to have smartly recoiled after testing its 20-day simple moving average (SMA), which resulted in a Hammer kind of formation. “Usually, this kind of a formation should have bullish connotations, provided a follow-through buying is witnessed in the next trading session. In that scenario, some pullback with targets towards 18,476 can be expected,” said Mazhar Mohammad, Chief Strategist –Technical Research & Trading Advisory at Chartviewindia.in.
The resumption of uptrend will be confirmed only on a close above 18,604, he said. It is critical that the index stays above 17,900, as a close below it will confirm a “fresh breakdown with initial targets placed around 17,400 levels”, he said.
If the index manages to sustain above 17,968 in the next session, traders with a high-risk appetite can go long by making use of a minor dip with a stop below 17,950.
On the options front, maximum Put open interest was seen at 18,000 followed by 17,500 strike, while maximum Call open interest was seen at 19,000 followed by 18,500 strike.
Call writing was seen at 18,900 then 18,600 strike while minor Put writing was seen at 17,600 then 17,800 strike. The data indicates that in the immediate term, the Nifty can trade between 17,900 and 18,400.
Bank Nifty
The banking index was the star performer, as it opened gap up and rocketed to 41,829, a new high, forming a bullish candle on the daily charts.
The Bank Nifty moved in a unilateral direction despite a dull day for the Nifty, closing 868.75 points, or 2.15 percent, higher at 41,192.40.
“Immense move and strength was witnessed in this space on account of short-covering move. It formed a bullish candle with long shadows on either side on the daily scale and has been forming higher highs-higher lows from the last three sessions,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
It has to hold above 41,000 to move towards 41,800 and 42,000, while on the downside, support shifts higher to 40,500 and 40,250, added.
The index can come under pressure in the next session, if it slips below 40,500, while strength will resume only on a close above 41,830, Mohammad said.
On the stock front, bullish setup was seen in PVR, City Union Bank, Axis Bank, ONGC, Escorts, Sun TV Network, Canara Bank and SBI, Taparia said.
Weakness was seen in IRCTC, Indian Energy Exchange, MCX, Dixon, SRF, Naukri, IndiaMART InterMESH, Gujarat Gas, Bandhan Bank, L&T Finance Holdings, M&M Financial, Bharat Forge, BPCL, Motherson Sumi, Strides Pharma Science, Balkrishna Industries, Berger Paints, Hero MotoCorp, Godrej Consumer Products and Maruti, he said.
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