The Nifty snapped a five-day losing streak on April 20, gaining 1.05 percent, with experts saying the index can head towards 17,275-17,500 if the reversal sustains.
The index opened higher at 17,045 and traded in positive terrain for most of the session to hit the day’s high of 17,187. Finally, it settled at 17,136.5, up 178 points, or 1.05 percent.
The Nifty strongly defended the psychologically vital 17,000-mark, forming a bullish candle, which resembled the bullish Harami pattern on the daily charts.
A bullish Harami pattern is formed at the bottom of a downtrend or near a significant support zone. This pattern is made up of two candlesticks.
On Day One, a long bearish candlestick is formed, while on Day Two, a small bullish candle is formed. The bigger bearish candle of Day One and a comparably small on Day Two represent a strong trend reversal.
The volatility also cooled after spiking to around 20 levels, which also supported bulls. India VIX, which measures the expected volatility in the market, fell 5.57 percent to 18.67 levels.
“The Nifty50 seems to have registered a Harami kind of bullish formation which yet times, this kind of formation signals a reversal in favour of bulls provided it is followed by a positive move in the next trading session,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
Mohammad said it is critical for the Nifty to sustain above 16,978 and in that scenario, it can head to 17,275.
For a sustainable up move, the index needs to bridge the bearish gap present between 17,275 and 17,457, he said. “In other words, the Nifty needs to register a close above 17,457 for a sustainable up move,” he said.
If the index breaches 16,978, weakness will initially extend towards 16,824.
For the time, it would be prudent to remain neutral on the index, whereas intraday traders with a high risk-taking ability can short below 16,970 for a modest target of 16,870, Mohammad said.
On the options front, maximum Call open interest was seen at 18,000 strike followed by 17,500 strike, while maximum Put open interest was seen at 17,000 strike followed by 16,500 strike.
Marginal Call writing was witnessed at 17,400 strike then 17,200 strike, while Put writing was seen at 17,100 strike then 17,000 strike.
The options data indicates that the Nifty could see a wide trading range of 16,800 to 17,350 in the coming days.
Banking index
The Bank Nifty also opened positive at 36,483 but relatively underperformed the market on April 20. It moved in a zig-zag fashion and closed flattish with losses of 27 points at 36,315.
The index formed a small-bodied bearish candle on the daily scale, as the closing was lower than the opening level.
“Now till it holds below 36,500 levels, weakness can be seen towards 36,000 and 35,750 levels, however, hurdles are placed at 36,750 and 37,000 levels,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
The broader markets had a mixed trend with largely equal advances and declines on the NSE. The Nifty midcap 100 index was up 0.75 percent and smallcap 100 index fell 0.18 percent.
On the stock front, a positive setup was seen in Ambuja Cements, UltraTech Cement, BPCL, Reliance Industries, Astral, The Ramco Cements, UPL, HPCL, IOC, Bharti Airtel, Bharat Electronics, Havells and AU Small Finance Bank. Weakness was seen in L&T Infotech, SAIL, Indraprastha Gas, IRCTC, L&T and Glenmark Pharma, Taparia said.
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