Technical View: Nifty form bullish candle on daily scale; short covering likely on expiry

The Nifty has to continue to hold above 11,450 to move towards 11,600 and 11,750 while on the downside, the medium-term support has shifted at 11,400-11,350, experts say.

August 26, 2020 / 05:56 PM IST


After rangebound trading in the first half, the market gained momentum in the second half to push the Nifty to 11,550.


The Nifty opened on a flat note and remained in the range, forming a small-bodied bullish candle on the daily scale. It rallied 77 points to close at 11,549.


The Nifty has to continue to hold above 11,450 to witness an upmove towards 11,600 and 11,750. On the downside, the medium-term support shifted to the 11,400-11,350 zone, experts said.


India VIX remained flat by 0.09 percent at 19.30 levels. Volatility is gradually cooling down which suggests a bullish stance and the buy-on-decline strategy could continue in the market.


As the Nifty closed above the psychological resistance of 11,500, it can also lead to short covering on the expiry session. In that scenario, based on last 31 days price action, a near-term target of around 11,850 can be projected, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.


Traders should remain long for a initial target of 11,850 with a stop below 11,460 on a closing basis, he added.


The option data suggests a trading range between 11450 and 11650 for August expiry day, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.


Maximum Put OI is at 11,500 followed by 11,000 strike while maximum Call OI is at 11,500 followed by 11,600 strike. We have seen Call writing at 11,650 strike while Call unwinding was seen at all the immediate strikes whereas meaningful Put writing is seen at 11,500 then 11,450 strike.


The Bank Nifty continued to outperform for the third consecutive session after the price breakout above 22,400 and managed to surpass previous monthly swing high of 23,200 zones, Taparia said.


Now it has to hold above 23,000 to move towards 23,750 and 24,000 while on the downside, key support exists at 22,750 and 22,400.

Positive setup is seen in Tata Motors, RBL Bank, IndusInd Bank, L&T Finance, Tata Power, M&M Finance, Shriram Transport, Kotak Mahindra Bank, Axis Bank, Reliance Indutries and HCL Tech while weak structure seen in Bharti Airtel, L&T and HPCL.

Rakesh Patil
first published: Aug 26, 2020 05:10 pm

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