Traders can retain positive stance as long as Nifty sustains above 12,040 levels, says Mazhar Mohammad.
The Nifty failed to hold on to 12,100 levels amid volatility and closed lower on February 20, the last day of the truncated week, after increase in oil prices.
Global cues were mixed but the key things to watch out for would be the impact and progress of coronavirus, though the infected cases have been declining and several factories have resumed work in China.
The index closed below 12,100 and formed a bearish candle on daily charts, as the closing was lower than the opening tick. The index saw a bearish chart formation in the last five of six sessions.
Hence, the price chart of the Nifty remained week as it is struggling to get past its 50-day exponential moving average (12,141) for the last two trading sessions. This is a crucial level for further upside, say experts.
After opening lower at 12,119, the Nifty gradually recovered in late morning deals and hit an intraday high of 12,152 at noon, but wiped out those gains in the last couple of hours to touch the day's low of 12,071.45. The index closed 45 points lower at 12,080.90.
The market will remain shut on February 21 for Mahashivratri.
"It appears to be the day of consolidation on the bourses, ahead of a long weekend, as the Nifty remained in a narrow trading range of 81 points before signing off the session with a bearish candle. Momentum on the upside shall pick up on a strong close above 12,150 levels. In such a scenario, the Nifty shall initially head towards its interim top of 12,246 levels whereas weakness shall reemerge on a close below 12,040 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said.
He said despite weak price action on February 20, some momentum oscillators turned positive on lower time- frame charts, including buy signal on the weekly stochastic oscillator.
Hence, traders can retain positive stance as long as the Nifty sustains above 12,040 but it looks prudent to initiate fresh longs in the index only on a close above 12,150, Mohammad said.
The Nifty ended the week with a marginal loss of 0.27 percent and formed a small-bodied candle with long lower shadow on weekly time-frame, which indicates that dips got bought into.
"Momentum oscillator RSI is moving in a sideways direction in both daily and weekly scale and thus not suggesting any trending move in the coming days. Considering overall chart structure, we are expecting the Nifty to move in the broader range of 11,900-12,250 in current series," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.
On the options front, maximum Put open interest was seen at 12,000 followed by 11,800 strike while maximum Call open interest was at 12,200 followed by 12,300 strike. Put writing was seen at 11,900 followed by 11,800 strike while Call writing was seen at 12,200 then 12,100 strike.
India VIX fell by 2.28 percent to 13.70 levels.
The Bank Nifty opened negative but managed to recover from lower levels and extend gains towards 31,100 levels. It relatively outperformed the benchmark index and formed higher highs and higher lows for the past two trading sessions. The index closed at 30,942.80, up 0.34 percent.
It formed a small-bodied candle on both daily and weekly scales with a long lower shadow, which suggests the emergence of buying interest from lower levels."Now, the Bank Nifty needs to hold above 30,600 levels to witness an upmove towards 31,300 then 31,500; while on the downside, strong support remains intact at 30,500 then 30,250 levels," Taparia said.
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