The Nifty50 on October 14 rebounded quite sharply to scale above 17,300 in the opening trade but lost some gains in the later part of the session to end off the day's high. The rally across global counterparts, a good start to the corporate earnings season by IT companies, and buying in banking & financial services, information technology and pharma stocks lifted sentiment.
The index closed below the opening levels and hence formed a bearish candle on the daily charts, indicating the volatility is likely to sustain for some more days. Even for the week, there was a high wave kind of pattern formation on the weekly scale and the index closed within the range of the previous trading week, down seven-tenth of a percent.
Going forward, the index has to close decisively above 17,350 - Friday's high, to get back into healthy strength, with crucial support at 17,000, followed by 16,800 levels, experts said.
But the broader markets put up a disappointing show on Friday, with the Nifty Midcap 100 as well as Smallcap 100 indices closing almost flat, while the market breadth was largely muted as about 997 shares declined against 944 advancing shares on the NSE.
The Nifty50 had a gap-up opening as it rose more than 300 points to 17,322 and climbed nearly up to 17,350 levels but witnessed some profit booking at higher levels in the later part of the session to hit a day's low of 17,170. The index rose 171 points or 1 percent to 17,186.
"The overall structure shows that the index is still in the short-term consolidation phase," Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas said.
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In terms of price patterns, it can form a triangular pattern on the daily chart. This implies that the rangebound action can continue in the short term, he added
The index can revisit 17,050 on the downside. On the other hand, the near-term resistance is at 17,350, the market expert said.
The significant cool-down in volatility also gave comfort to the bulls. India VIX was down by 10.01 percent at 18.26 levels and if it drops below the 18 mark then stability is likely to be seen in the market.
On the Option front, we have seen maximum Call Open interest at 18,000 strike with more than 42 lakh contracts, followed by 17,500 strike, with Call writing at 17,300 strike then 18,100-18,000 strikes and significant unwinding at 17,100 & 17,000 strikes.
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The maximum Put open interest was seen at 17,000 strike with more than 37 lakh contracts, followed by 16,000 strike & 16,500 strike, with Put writing at 17,300 strike then 17,200 & 16,900 strikes, and significant unwinding at 17,100 & 17,000 strikes.
The above Option data suggested that the Nifty may trade in the range of 16,900-17,500 in coming sessions.
Bank Nifty opened higher by more than 800 points at 39,446 and remained in the positive terrain throughout the session to close with nearly 700 points gains at 39,306.
The banking index has formed a small-bodied bearish candle on the daily charts as the closing was lower than opening levels, while there was bullish candle formation on the weekly scale, as it was up a third of a percent during the week.
"The Bank Nifty index after Friday's gap-up opening was unable to continue the momentum on the upside. The index's immediate resistance is seen at the 39,500-40,000 zone where a significant amount of Call writing has been visible," Kunal Shah-Senior Technical & Derivative Analyst at LKP Securities said.
Shah further said the index if breaks the resistance with volumes will see a sharp short covering on the upside towards 41,500-42,000 levels.
The lower-end support of 38,400 will act as a line of defence and if breached will open up gates for further downside, Kunal Shah added.
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