Technical view: Nifty forms bullish candle after 2-days of consolidation; tread with caution

Market

Bulls pushed the Nifty50 index to a record high of 11,459.95 on Wednesday after two straight days of consolidation, but analysts’ feel that investors should tread with cautions as we are trading near crucial resistance levels.

The index formed a bullish candle on the daily charts after two successive bearish candles. The next crucial resistance for the index is placed at 11,500-11530 while support is placed at 11,330, suggest experts.

The Nifty50 which opened at 11,412 hit a record high of 11,459. It hit an intraday low of 11,379 before closing the day 60 points higher at 11,450.

The action on the banking space really stood out. Bank Nifty has been making higher lows from last four trading sessions and made a new lifetime high at 28,128 marks.

The index formed a Bullish candle on the daily scale with the highest ever daily closing ahead of weekly expiry day. It has to hold above 27,900 zones to extend its move towards 28,250 zones while major support is seen at 27,650 zones.

“Albeit Nifty50 registered a bullish candle with new life time highs post two trading sessions of consolidation market breadth remained in favour of bears suggesting cautious stance in the broader markets,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Besides momentum oscillators are not registering new swing highs unlike price chart thereby facilitating a negative divergence which can trigger a correction going forward. In case if this rally gets extended into next session then it can test critical resistance placed around 11,530 on long-term charts,” he said.

Mohammad further added that on the downsides 11,330 appears to be a critical support. Considering the fact that market is turning choppy and volatile at higher levels it looks prudent for the short term traders to book profits and wait for a correction towards critical supports rather than chasing the upswing.

India VIX remained flattish at 12.57. Overall, lower volatility suggests that bulls are likely to hold the market.

On the options front, maximum Put OI is at 11,000 followed by 11,200 strikes while maximum Call OI is placed at 11,500 followed by 11,400 strike.

“The Nifty index opened positive and made a new lifetime high of 11460 marks. It managed to hold its gains for the entire trading session and formed a Bullish Candle on a daily scale with the highest ever daily close,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Small decline is being bought in the market as supports are gradually shifting higher. Now it has to continue to hold above 11380 zones to extend its move towards 11500 then 11600 zones while on the downside major support is seen at 11300 then 11250 zones,” he said.