Technical View | Nifty forms bullish candle but year-high volatility supports bears


The Nifty50 opened 350 points down on February 22 amid a worsening Russia-Ukraine crisis and a spike in oil prices but made a smart recovery in the last couple of hours to narrow losses.

The Nifty closed 114.50 points down at 17,092, recovering around 240 points from the day’s low. As the closing was higher than the opening level, the index formed a bullish candle on the daily chart but the sentiment remained in favour of the bears.

The index defended the crucial support of 16,800 as well as the 200-day moving average (16,877) smartly but if it breaks it on a closing basis, then a steep fall lies ahead, experts said.

“… Hence, sustaining above 16,800 levels, on closing basis, a pullback move can be expected towards 17,350 levels,” said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

The Nifty tested the lower Bollinger Band on daily charts when it slipped to intraday low of 16,843 levels and smartly bounced back, he said.

“In case, 16,800 is decisively breached, then initial targets can be the test of 200-day EMA (exponential moving average  16,720) but a fall to major corrective swing low of 16,410 cannot be ruled out,” he said.

For the time, positional traders with a high-risk appetite can to go long with a stoploss below 16,800 and should look for a target of 17,350, he said.

Also read: Taking Stock | Market ends lower for the fifth day on worsening Russia-Ukraine crisis

The volatility also spiked to hit a one-year high, indicating further swings, which favours bears.

India VIX, which measures the expected volatility in the market, jumped 16.43 percent to 26.66, the highest level since February 26, 2021.

“Volatility gave a breakout above 24 and comparatively higher levels of VIX suggest a roller-coaster ride with comfort of bears in the market,” said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Also read: Gainers & Losers: 5 stocks that moved the most on February 22

The options data indicated that the Nifty could see a trading range of 16,800 to 17,350 in the coming sessions. There was maximum Call open interest at 18,000, then 17,500 strike, while maximum Put open interest was seen at 17,000 then 16,000 strike.

Call writing was seen at 17,700 then 17,000 strike, while Put writing was seen at 16,500 and 16,900 strike.

Also read: Russia-Ukraine crisis’ impact on stock market, oil prices & gold demand; what should investors do?

Banking index

The Bank Nifty also opened gap down at 36,833 but remained resilient and despite a gloomy start, it recovered to 37,660.

The index closed at 37,372, down 314 points, but formed a bullish candle on the daily scale as the closing was higher than the opening level.

“The Bank Nifty has been forming lower lows from the last four sessions. Now it has to hold above 37,000 levels for an up move towards 37,750 and 38,000, whereas support can be seen at 36,750 and 36,500 levels,” said Taparia.

L&T Infotech, Mphasis, Cholamandalam Investment, Hero Motocorp, M&M, Bajaj Finserv, PVR, Colgate Palmolive, TVS Motor, Eicher Motors, Hindalco, HDFC, Kotak Mahindra Bank, Bajaj Auto and Maruti Suzuki had a positive set up, said Chandan.

Weakness was seen in DLF, Zee Entertainment, MCX, Tata Steel, BPCL, TCS, Glenmark Pharma, Amara Raja Batteries and BHEL.

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