Mazhar Mohammad advised traders to remain cautious with a stop below 10,900 levels on long side bets as a breach on a closing basis can again strengthen the bearish sentiment.
The market remained strong throughout the session on August 4, with the Nifty50 closing above the psychologically vital 11,000- mark driven by private banks and Reliance Industries. Improving economic activities and positive global cues on improved US manufacturing data also lifted sentiment.
After losing 400 points in the previous four sessions, the index rallied more than 200 points and formed a bullish candle on daily charts as closing was much higher than opening levels.
The Nifty strongly defended 200-DMA and gave a strong positive signal. The rally could be extended to 11,249-11,341 in the coming sessions if the index holds 11,000 mark, experts say.
India VIX fell by 5.97 percent to 23.67 levels. "Decline in VIX from its recent bounce of 25.69 suggests that the bulls are using any decline as a buying opportunity and overall trend could remain bullish," Chandan Taparia of Motilal Oswal said.
After a strong opening, the Nifty touched an intraday high of 11,112.25 and low of 10,908.10. The index closed at 11,095.30, up 203.70 points or 1.87 percent.
"The bulls appear to have made a strong come back as Nifty50 defended its 200-day simple moving average whose value is placed around 10,856 levels. This kind of strong recovery with almost a reversal sign from critical long-term moving averages may be hinting at a short-term bottom around last Monday's low of 10,882 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
Sustaining above 10,900 levels, one can retain positive stance as the Nifty appears to have embarked on a strong pull back rally, he said. The ideal target on the upside shall be 11,249 and beyond that, a retest of recent swing high of 11,341 can't be ruled out, he said.
Despite this strong upmove, technical oscillators gave mixed signals, Mohammad said. Traders should remain cautious with a stop below 10,900 levels on long-side bets as a breach of this level on a closing basis can strengthen the bearish sentiment.
The options data indicated that the Nifty could witness a trading range of 10,800-11,300 zones for the next few sessions.
On the Options front, maximum Put open interest was at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Call unwinding was at all the immediate strikes while Put writing was seen at 10,500 then 10,800 strike.
The Bank Nifty opened positive and turned higher after taking support at 21,000 levels. Earlier, it had turned twice from the same key support zone and headed to 23,000.
The index closed 418.40 points or 2 percent higher at 21,490.50 and formed a bullish candle.
"Mechanical indicators are set to give bullish crossover from oversold zones and again reclaiming to its 50 DEMA. Now if it manages to hold above 21,500-21,600 levels, then bounce can be seen towards 22,250-22,350 zones while on the downside, immediate support is seen at 21,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in Reliance Industries, Bharat Electronics, Jubilant Foodworks, Tata Consumer, JSW Steel, Torrent Pharma, Vedanta, Voltas, Dr Reddy's Labs, Bharat Forge, Siemens and Cadila Healthcare while weak structure was seen in NTPC, Shriram Transport Finance, BPCL, IndusInd Bank and IGL.Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.