The Nifty50 cut down losses due to recovery in the second half of the session and closed off the day’s low on December 20, forming a small bullish candle with a long lower shadow which resembles a Hammer kind of pattern on the daily charts.
The Hammer is a bullish reversal pattern formed after a decline. It consists of no upper shadow, a small body, and a long lower shadow. The long lower shadow signifies the stock bounced back after testing its support, where demand is located.
Hence, if the index sustains this recovery in coming sessions and decisively crosses 18,450 (near the day’s high of a previous couple of sessions), then an upward journey towards 18,500-18,600 can be a possibility, with support at the 18,200-18,100 zone, experts said.
The index opened lower at 18,340 and extended selling pressure to hit a day’s low of 18,203. The index showed a smart recovery in the later part of the day, up to 18,405 and finally settled with 35 points loss at 18,385.
“Currently the market is witnessing a non-directional activity and perhaps traders are waiting for either side breakout,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.
For bulls, 18,450 would be an important breakout level to watch. “If the market manages to trade above the same, then we can expect a quick uptrend rally towards 18,550-18,600,” the expert said.
Also read: Sensex, Nifty tumble amid global macro concerns; factors pulling stock market lower
On the flip side, he feels trading below 18,200 may increase further weakness up to 18,100-18,050.
On the Option front, we have maximum Call open interest at an 18,500 strike, indicating the near-term crucial resistance for the Nifty50, followed by a 19,000 strike which was used to attract maximum open interest till the previous session, and an 18,600 strike. Considering the current volatility and as we approach monthly expiry, now 19,000 seems to be an unlikely target for the index. The maximum Call writing was seen at 18,400 strike, then 18,300 strike and 18,300 and 18,500 strikes.
On the Put side, the maximum open interest was seen at 18,300 strike, followed by 18,000 strike, which both can be crucial support areas, with maximum writing at 18,200 strike, then 17,700 strike.
The above Option data indicated that the expected trading range of the Nifty50 could be 18,200-18,500 strike in the near term.
India VIX increased by 1.67 percent to 13.78 level, from 13.55 level. Having it on the lower side for several days seems to be indicating that the major downside may be unlikely, at least, in short term, experts said.
Banking index
Bank Nifty index, which comprises 12 leading banks, also opened a gap down at 43,153 and fell further to hit an intraday low of 42,955. The index showed some recovery amid the rangebound session, and touched a day’s high of 43,426 but failed to surpass the previous day’s high as well as failed to hold on to the same towards closing.
The banking index finally settled at 43,360, down 54 points, and formed a bullish candle on the daily charts as the closing was lower than the opening levels.
On the Option front, we have seen maximum Call open interest at 44,000 strike, the crucial resistance, followed by 43,500 strike, with Call writing at 43,000 strike, then 43,400, while the maximum Put open interest was seen at 43,000 strike, the key support, followed by 43,200 strike, with Put writing at 43,000 strike then 43,100 strike.
“Key resistance and support levels for Bank Nifty are 43,800 and 42,950 respectively,” Mohit Nigam, Head – PMS at Hem Securities said.
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