Technical View | Nifty forms bullish engulfing pattern on weekly frame, 18,500 looks crucial


The Nifty50 managed to extend its northward journey on November 25 and gave a fresh record closing above the 18,500 mark on the first day of the December series. Auto, technology, pharma and oil & gas stocks supported the market, whereas select banking & financial services, and FMCG stocks were under pressure.

The index has traded within 90 points range and formed a Doji-kind of pattern on the daily charts, indicating indecisiveness among bulls and bears about the future market trends, and making higher highs and higher lows for the third consecutive session. On the weekly timeframe, there was a Bullish Engulfing pattern formation as the index gained more than 1 percent after consolidation in the previous week, and also there was a higher highs formation for the sixth week in a row.

Now, 18,500 is expected to be a crucial level for the Nifty50 and if it sustains this then 18,600 is very much on the cards in coming sessions which ultimately can open the door for 18,800-19,000 levels, with crucial support at 18,300-18,000 levels, experts said.

The Nifty50 opened higher at 18,528 and traded within a range of 18,535-18,445 before having a highest-ever close at 18,512.80 with 29 points gains.

“On the daily chart, the Nifty has reached the rising trend line found by joining the preceding peaks. The momentum indicator has reached the falling trendline on the daily timeframe. Based on the price chart and momentum indicator setup, we can infer that the index is on the verge of strong directional movement over the short term,” Rupak De, Senior Technical Analyst at LKP Securities said.

Also read: Aggressive rollover suggests Nifty will likely reach close to 19,000 in December expiry

On the lower end, De feels a fall below 18,450 may trigger a correction towards 18,100-18,000; whereas, on the higher end, a rise above 18,605 may induce a decent rally in the market.

The broad trading range for the Nifty50 for coming sessions is expected to be 18,000-19,000 levels.

On monthly option data, we have seen maximum Call open interest at 19,000 strike followed by 20,000 strike, with maximum Call writing at 20,000 strike then 19,000 strike.

On the Put side, we have the maximum open interest at 18,000 strike followed by 17,000 strike, with writing at 18,500 strike and then 18,200-18,300 strikes.

India VIX hit a fresh more than one-year low on Friday, down by 1.07 percent to 13.33 levels, consistently giving comfort for bulls.

Also read: DMA Tracker | Index in strong bull zone as 27 stocks from BSE Sensex trade above their 200 DMA

Bank Nifty opened higher at 43,192 and hit a record high of 43,339. After early trade gains, gradually it lost those gains and slipped up to 42,865 and finally settled with 91 points loss at 42,984 amid volatility, forming a bearish candle on the daily charts and making higher highs and higher lows for the fourth consecutive session.

On the weekly basis, it has formed a bullish candle making higher high higher low formation for the third straight week. Now, it has to hold above the 42,750 level for an up move towards 43,339 and 43,500 levels, whereas supports are placed at 42,750 and 42,500 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

It was a strong day for broader markets after consolidation in previous sessions. The Nifty Midcap 100 and Smallcap 100 indices gained around 1 percent each on positive breadth.

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