Technical View | Nifty forms bullish candle, 17,500-17,600 crucial area for further upside

India

The Nifty50 had more than 100 points gap up opening and decisively crossed more than couple of earlier swing highs to close with a percent gains, forming small bodied bullish candle on the daily charts on October 18. The 50-share NSE benchmark index extended uptrend for third session in a row, tracking positive mood in global counterparts, but failed to sustain 17,500 mark at close.

The index is now closer to crucial area of 17,500-17,600 levels. If it manages to surpass this area, then it can gradually march towards 17,800-18,000 levels in coming sessions, with near term support at 17,300 followed by crucial at 17,000, experts said.

The rally was seen across sectors with Bank, Auto, FMCG, IT, Metal and Oil&Gas indices gaining 1 percent each, while the broader markets were also strong with the Nifty Midcap 100 index rising 1.15 percent and Smallcap 100 index climbing 0.8 percent.

The Nifty50 opened higher at 17,439 and jumped up to 17,528, an intraday high. The index rose 175 points to 17,487, the highest closing level since September 22, taking total three-day gains to around 3 percent.

“In terms of the Fibonacci retracement, 61.8 percent retracement of the entire September decline i.e. 17,580 is expected to keep the current bounce in check,” said Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas.

Also read –¬†Taking Stock | Extended buying pushes Nifty towards 17,500; Sensex gains 550 points

He further said the zone of 17,500-17,600 encompasses multiple technical parameters, which are expected to attract fresh round of selling. Unless this zone is crossed on a closing basis, the Nifty can start sliding down again.

Failure to sustain at this level will push the index back to 17,300-17,200 in the coming sessions, the market expert said.

On Option front, we have continued to see maximum Call open interest at 18,000 strike followed by 17,500 strike while the maximum Put open interest was seen at 17,000 strike then 16,500 strike.

The Call writing was seen at 17,500 strike then 17,700 strike while there was Put writing at 17,500 and 17,400 strikes.

The above Option data indicated that there is a change in expected trading range for the Nifty50 for coming sessions, to 17,200-17,700 levels, from 17,000-17,500 levels earlier.

The decline in volatility also made the bulls comfortable at Dalal Street. India VIX, the fear index fell by 5.4 percent to 17.42 levels. If volatility falls further around 15 mark and sustains there, then the bulls may turn stronger in coming sessions, experts said.

Also read –¬†Sensex, Nifty rally for third straight session: Factors propelling the markets higher

Bank Nifty opened gap up by more than 300 points at 40,252 and follow up buying kept the index afloat and it touched an intraday high of 40,435. It moved in a narrow range of 300 points throughout the day.

The banking index closed with around 400 points gains at 40,319 and formed a small bodied bullish candle on daily scale. It has to hold above 40,000 to make an up move towards 40,750 and 41,000 levels, whereas supports are placed at 40,000 and 39,750 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

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