The Nifty50 extended its northward journey for the fifth consecutive session on August 12 and registered a fresh closing high ahead of inflation and industrial output data due later in the day. Positive European cues, a fall in volatility, and buying in metal, select banking & financial services along with index heavyweight Reliance Industries aided the rally.
The index witnessed bullish candle formation on the weekly scale for the fourth consecutive week, indicating the mood is positive, while on the daily charts, there was a small-bodied bullish candlestick pattern with a higher high formation.
As long as the index holds the previous bullish gap zone of 17,566-17,632, the uptrend is expected to continue till 17,800-17,900-18,000, but small bouts of volatility and consolidation can't be ruled out after a rally in four straight weeks, experts said.
The mood was also positive in the broader space with moderately decent breadth. The Nifty Midcap 100 and Smallcap 100 indices gained seven-tenth of a percent and a quarter of a percent respectively, while about 10 shares advanced against 9 declining shares on the NSE.
The Nifty50 started off the day flat at 17,660 and remained volatile throughout the session but largely with a positive bias. The index hit an intraday high of 17,725 and a low of 17,598, before closing the session with 39 point gains at 17,698, the highest closing level since April 8, 2022.
"Defiant bulls continued to inch upwards with a positive momentum before signing off the session with an indecisive formation. The current multi-week rally also led to the buy signal on the weekly charts, strengthening medium-term sentiment," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
However, at a high of 17,720 levels, it seems to have reached critical resistance points with over-bought zones. Hence, for a fresh breakout, he feels the index needs to close above 17,800 levels. In that scenario, the strength can expand towards 18,114 levels.
Meanwhile, a close below 17,597, the day's low, may induce some weakness with an initial target of 17,359, the market expert said.
Traders should not initiate fresh longs unless the Nifty registers a close above 17,800 levels whereas intraday shorting may be considered below 17,550 levels for a modest target, Mazhar Mohammad advised.
The falling volatility for the second straight day also supported bulls to stay on Dalal Street. India VIX, which measures the expected volatility in the market, fell by 4.07 percent to 17.61 levels.
On the Option front, we have seen maximum Call open interest at 18,000 strike followed by 17,500 strike with Call writing at 17,700 strike then 18,100 strike, while the maximum Put open interest was seen at 16,500 strike followed by 17,000 strike with Put writing at 17,600 strike then 17,700 strike.
The above Option data suggested that an immediate trading range for the Nifty50 could be between 17,300 to 17,800 levels, while a broader trading range can be between 17,200 to 18,000 levels, experts said.
Bank Nifty opened positive at 38,942 and continued its winning streak after taking support near 38,740 levels. It continued the outperformance and headed towards 39,100 levels with the formation of the small-bodied bullish candle on a daily scale. The index closed 163 points higher at 39,042.
It has been making higher lows for the last eight weeks and supports are gradually shifting higher. Now, it has to hold above 38,888 levels for an up move towards 39,250 and 39,500 zones whereas supports are placed at 38,750 and 38,500 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services 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.