Technical View | Nifty forms Bullish Engulfing pattern on monthly scale, 17,500 the next hurdle


It was another good day for Indian shares. The broad-based Nifty went past the psychologically vital 17,000 mark to close 229 points higher at 17,158.30.

The index surpassed its 200-day moving average after a long time, raising hopes that gradually it may move towards 17,500, the next hurdle, but for that, it has to strongly hold the 200-DMA, experts said.

The index gained 2.6 percent for the week and 8.7 percent for the month of July. It formed a bullish candle not only on the daily but also on weekly and monthly charts. It also formed a Bullish Engulfing pattern on the monthly chart, indicating the bulls may be in a strong position now.

A bullish engulfing pattern is also known as a reversal pattern, generally formed after a downtrend. In this pattern, the green candle completely covers the previous red candle.

Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia, said if the index sustains above 17,018 levels (the intraday low on July 29), it can extend the upswing towards 17,550, where a slew of resistance points are placed.

However, the swift up move from the lows of 16,438 to 17,170 in just three trading sessions can lead to some consolidation or profit booking.

Therefore, fresh positions are advised only on dips but with a stop-loss below 17,020 levels on a closing basis, as consolidation for a couple of sessions above 200-day SMA can eventually lead to higher targets of 17,500 levels, the market expert said.

The Fed commentary seems to have been taken positively by the market along with stability in oil prices, FII buying and largely in-line corporate earnings.

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All sectors participated in the rally, with the metal index gaining nearly 4 percent, IT 1.7 percent and auto 1.3 percent.

The participation from the broader space was also strong. The Nifty Midcap 100 index rallied 1.4 percent and smallcap 100 jumped 1.7 percent on positive breadth. More than two shares advanced for every share falling on the NSE.

Also read: Taking Stock | Another day of healthy gains; Sensex up 713 points, Nifty above 17,100

Volatility also declined further. India VIX, the fear index fell 2.71 percent to 16.55 levels.

The options data indicates that the Nifty may trade in a broad range of 17,000-18,000 in the coming session, 17,000 can be the immediate support followed by 16,500, which may be a crucial support.

Banking index

The Bank Nifty closed 113 points higher at 37,491 but formed a bearish candle on the daily charts as the closing was lower than opening levels.

On the weekly scale, the index formed a bullish candle as it gained 2 percent. For the month, it gained 12 percent and formed a Bullish Engulfing pattern on the monthly chart.

“The week ended on a high note with the bulls in Bank Nifty having complete control and thrashing the bears left, right and centre. The index remains in a buy-on-dip mode, with immediate support at the 36,800 level,” Kunal Shah, Senior Technical Analyst, LKP Securities said.

The upside resistance is at 38,000, where the highest open interest is built up on the Call side, and once breached, it will see a rally towards 38,500-39,000, he added.

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