Technical View | Nifty forms large bullish candle, volatility expected to remain high


The de-escalation of tensions between Russia and the West over Ukraine following reports of a partial Russian troop pullout helped the Nifty recoup most of the previous day’s losses on February 15.

After a volatile start, the Nifty extended gains to hit the day’s high of 17,375 and closed 510 points higher at 17,352.50.

“Positive news flows emanating from the global front appear to have bolstered the confidence of bulls who recouped all the losses of Monday by successfully bridging the bearish gap present in the zone of 17,099–17,303 levels,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

The index gained 3 percent and defended its 200-day moving average (16,811). It formed a large bullish candle on the daily chart as the closing was higher than the opening level.

The rally was driven by short-covering. A bit of value buying was also seen across sectors, with the Nifty bank, auto, financial services, IT and realty gaining 3-4 percent.

The broader market also participated in the run, as the Nifty midcap 100 and smallcap 100 indices gained 2.86 percent and 2.5 percent.

The sharp bounce back, which was along expected lines with the easing of global concerns, is good but given the high volatility, the market may remain rangebound until the index decisively closes above 17,800, experts said.

The volatility did cool down but needs to fall way below 20 levels for the market to stabilise. India VIX, which measures the expected volatility in the market, declined by 10.31 percent to 20.61 levels.

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“The level of 16,800 seems to be emerging as short-term critical support. Hence, if the index sustains above the said support level, it can be expected to test its 20-day simple moving average (SMA) present around 17,450 levels. Therefore, a close above the said average can be considered as an initial sign of strength,” Mohammad said.

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However, Mohammad said the short-term trend would not completely change in the favour of bulls unless the Nifty closes above 17,800.

Traders should remain neutral on the index by shifting focus to stock-specific opportunities, he said.

The options data indicates that the Nifty could see a trading range of 17,000-17,500/17,700 in the coming sessions.

There was maximum Call open interest at 18000 strike then 17500 strike while maximum Put open interest was seen at 17000 then 16500 strike. Call writing was seen at deep out-of-the-money strike while Put writing was seen at 17200 then 16900 strikes.

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The banking index

The Bank Nifty opened moderately higher at 36,989.80 and remained volatile in the first hall. Later in the day, it made a smart recovery to the high of 38,231.60. It closed above 50-day exponential moving average, placed at 37,690, at 38,170, with a gain of 1,261 points. The index formed a bullish candle on the daily charts and also defended 200-day moving average (36,477).

“Now, the index has to hold above 38,000 levels for an up move towards 38,500 and 38,850 levels, whereas supports can be seen at 37,750 and 37,500 levels,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On the stock front, positive setup was seen in Tata Motors, SRF, Bajaj Finance, Indian Hotels, Eicher Motors, Mindtree, Canara Bank, Hero MotoCorp, SBI, Bandhan Bank, Federal Bank, Trent, AU Small Finance Bank, Titan, InterGlobe Aviation, Bata India, L&T, Asian Paints, Siemens, Bank of Baroda, Apollo Hospitals Enterprises, Reliance Industries, PVR, Infosys, TVS Motor, IndusInd Bank, Bajaj Auto, Bharti Airtel, HDFC Bank, Maruti, Axis Bank and Hindalco, said Taparia. Weakness was seen in Manappuram Finance, Metropolis, NMDC and Petronet LNG.

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