After a day of consolidation, the Nifty50 witnessed a gap up opening on August 11 and reported a four-month high on August 11 following a decline in US inflation for July. However, there was a bearish candlestick pattern formation on the daily charts as the closing was lower than opening levels.
Hence, the index needs to defend Thursday’s bullish gap zone for further uptrend and if it decisively surpasses the long downsloping resistance line point (which is above 17,800), adjoining record high of 18,604 in October 2021 and January 18, 2022, then 18,000 can be the next possibility, experts said.
The rally was also seen in the broader space as the Nifty Midcap and Smallcap 100 indices gained 0.87 percent each but the breadth was not very strong. About 1,031 shares advanced against 914 declining shares on the NSE.
Nifty Bank, IT, and Financial Services indices topped the gainers’ list, rising more than 1.5 percent each.
The Nifty50 opened higher at 17,712 and hit a day’s high of 17,719, but overall the index remained in a tight range on the higher side, before closing with 124 points gains at 17,659.
“Bulls appear to have cheered the global cues as the index opened with a strong gap up but the intraday trading range remained around 88 points which can be a cause for concern,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
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Moreover, the index neared a downsloping trendline, which is in progress from October 2021 highs of 18,604, which offered resistance in the past. Hence, unless the index closes above the said trendline, whose value is placed around 17,800, further strength shall not be expected, he said.
Meanwhile, the Nifty needs to defend the bullish gap zone of 17,631 and 17,566 levels registered in Thursday’s trading session to retain the optimistic stance while some weakness can be expected on a close below 17,566 levels.
For the time being, the market expert advised traders to book profits on long side bets if any and remain neutral for the day.
The volatility cooled down after the announcement of US inflation numbers. India VIX, the fear index fell by 6.29 percent to 18.36 levels, making the bulls more comfortable.
Also read – Taking Stock: Indices hit four-month high post US inflation data, Nifty tops 17,600
On the Option front, we have seen the maximum Call open interest at 18,000 strike, followed by 17,500 & 17,700 strikes, with Call writing at 17,700 strike then 18,300 strike, while the maximum Put open interest was seen at 16,500 strike followed by 17,500 & 17,500 strike, with Put writing at 17,600 strike, then 17,700 strike.
With Thursday’s rally, the likely trading range for the Nifty50 for coming sessions, indicated by the above Option data, has shifted higher to 17,400-18000 levels, from 17,300-17,700 levels earlier.
Bank Nifty also saw a strong gap up opening at 38,713 and remained in a range of around 280 points. The banking index rose 592 points to 38,880 and formed a bullish candlestick pattern on the daily charts, maintaining higher highs for the third straight session.
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“The index surpassed the immediate hurdle of 38,400 which will now act as support on the downside. The upside resistance is placed at 39,000 and if the same gets breached on a closing basis then we will see further upside towards 40,000 level,” Kunal Shah, Senior Technical Analyst at LKP Securities said.
The index is trading in overbought territory and a profit booking scenario cannot be ruled out from the current levels, he feels.
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