Caution should be maintained and if traders are long on the index, then a stop loss could be placed below 10,900 levels, say experts.
After a splendid Tuesday, traders have just one question: will the momentum sustain? The S&P BSE Sensex has recouped some of the losses of the past four sessions when the index closed in the red.
The Nifty50 also closed just a shade below 11,100. Experts are of the view that any dip towards 10,800 is likely to get bought into and on the upside, resistance is seen around 11,250-11,300 levels.
Hence, caution should be maintained and if traders are long on the index, then a stoploss could be placed below 10,900, experts say.
The bulls appear to have made a strong come back as the Nifty50 defended its 200-day simple moving average, the value of which is placed around 10,856 levels.
This kind of strong recovery with almost a reversal sign from critical long-term moving averages may be hinting at a short-term bottom around last Monday’s low of 10,882.
“Hence, sustaining above 10,900 levels, one can retain positive stance as the Nifty appears to have embarked on a strong pullback rally,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“In this attempt, the ideal target on the upside shall be 11,249 levels and beyond that retest of recent swing high of 11,341 can’t be ruled out. However, despite this strong upmove, technical oscillators remained with mixed signals,” he said.
Traders should remain cautious with a stop below 10,900 on long-side bets as a breach on a closing basis could strengthen the bearish sentiment, he said.
We have collated views of experts on what investors should do on August 5 when the market resumes trading:
Nagaraj Shetti, Technical Research Analyst, HDFC Securities
Tuesday's sharp upside bounce could be a reflection of the significance of support of 200-day simple moving average and also previous swing high of mid-July, as per the concept of change in polarity.
The positive sequential movements like higher tops and bottoms continued on the daily chart and Monday's swing low of 10,882 could now be considered as a new higher bottom of the sequence.
As per this pattern, the Nifty has the potential of moving towards its recent swing high of 11,340 in the near term. We need a follow-through upmove to confirm this pattern.
The key lows of 10,900 is going to be crucial support for the market for the near term. Further sustainable upmove in the next one-two sessions is likely to bring the bulls back into action and the Nifty could race towards the recent swing high of 11,340 levels in the next three-five sessions. Any intra-week decline from the highs could find a base at around 11,000.
Ruchit Jain, Senior Analyst - Technical and Derivatives, Angel Broking
The near term will continue to be positive till 10,880 remains intact. Hence, traders are advised to trade with a positive bias and look for buying opportunities in intraday declines.
On the flipside, 11250-11300 would be the immediate target zone to watch out for. The midcap space continued its momentum and now the banking and financial stocks, too, can participate to cover up for their recent underperformance.
Thus, we continue to look for such stock-specific opportunities which can provide good returns in the near term.
Deepak Jasani, Head Retail Research, HDFC Securities
Volumes on the NSE were marginally above average. All sectoral indices ended in the green except IT. The broader indices (midcap and smallcap) rose less.
The bounce in the Nifty after taking the support of the gap (formed on July 17-20) on Monday was on expected lines. It will be interesting to watch as to whether the upward momentum in the market continues beyond another 200 Nifty points.
Ajit Mishra, VP- Research, Religare Broking Ltd
We believe Indian markets will continue to take cues from global peers and the upcoming RBI policy will the next major trigger.
At the same time, as more companies announce Q1FY21 earnings, stock-specific action will continue to induce high volatility. We reiterate our advice to focus on stock selection and risk managementDisclaimer: The views and investment tips expressed by 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.