Technical View | Nifty forms bullish candle, 17,800 a possibility now

Domestic equities started the week on a strong note on August 8, as the Nifty50, after initial volatility, stayed strong for the rest of the session and reclaimed 17,500 to close nearly a four-month high.

The index formed a bullish candlestick pattern on the daily charts, a session after it witnessed Doji formation. Hence, the Nifty moving towards 17,800 in coming sessions seems like a possibility now, and traders can go long with a stop-loss at 17,359, the low point of Monday, experts said.

The bullish candle formation appears when the market closes above opening levels. Banking & financial services, auto, and metal stocks were the drivers in today’s session.

The broader markets also gained momentum after a mixed trade in the previous session. The Nifty Midcap 100 and Smallcap 100 indices climbed six-tenth of a percent and a third of a percent, respectively but the breadth was not looking very strong as about 1,090 shares advanced against 876 falling shares on the NSE.

The Nifty50 opened in the green at 17,401 levels but soon hit the day’s low of 17,360. However, it immediately rebounded and gradually extended gains to surpass 17,500 to hit an intraday high of 17,534. The index rose 128 points to 17,525, the highest closing level since April 12.

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“Albeit bulls are powering the index, higher upsides seem to be limited from current levels as some of the oscillators on medium-term charts are displaying extremely overbought levels. However, post today’s move, the price chart is looking very strong and unless the index slips below 17,359 levels, the weakness will not emerge,” Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

If the index sustains above 17,359 levels, then it can head towards the 17,800 – 17,900 zone where tough resistance can be expected.

Therefore, the market expert advised log side traders to place a stop-loss below 17,359 levels and look for a target of 17,800 levels whereas shorting opportunities shall arise only below 17,350 levels.

Along with the market uptrend, volatility is also rising. India VIX, which measures the expected volatility in the market, rose by 3.43 percent to 19.57 levels, the highest since July 6. In fact, since the start of August, VIX increased by 18 percent.

On the Option front, we have seen maximum Call open interest in 18,000 strike, which could be crucial resistance going forward, followed by 17,500 strike, with Call writing at 17,500 and 18,000 strikes.

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The maximum Put open interest was seen at 16,500 strike, which could be a crucial support level to watch going forward, followed by 17,000 and 16,000 strikes, with Put writing at 17,500 & 17,400 strikes.

The above Option data indicated that the Nifty50 may trade in a broad range of 17,000-18,000 in coming sessions.

Bank Nifty opened moderately lower at 37,847 and corrected up to 37,681, but within the initial half an hour of trade, it rebounded and traded strongly to hit a day’s high of 38,247. The index finally settled at 38,237, the highest closing since April 4, up 317 points, and formed a bullish candlestick pattern on the daily charts.

“Immediate support and resistance for Bank Nifty are 37,700 and 38,750 respectively,” Mohit Nigam, Head – PMS at Hem Securities said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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