Traders who are long should hold with a stop below 10,485 on a closing basis and look for an initial target of 10,669, Mazhar Mohammad of Chartviewindia.in says.
The Nifty50 remained strong for the second consecutive session and closed at almost four-month high on July 2, following positive global cues and progress in coronavirus vaccine trials.
The index settled above 10,550 levels and formed a small-bodied bullish candle on the daily charts as closing was higher than opening levels.
As the index failed to close above its June's highest level of 10,553.15, the structure still looks weak, hence it has to give a positive close in the coming session, which can prove that the bulls are in a strong position, experts say.
Traders, who are long, should hold with a stop below 10,485 on a closing basis and look for an initial target of 10,669, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.
After opening higher at 10,493.05, the Nifty50 remained strong and hit an intraday high of 10,598.20 and a low of 10,485.55. The index ended at 10,551.70, the highest closing level since March 6 this year, up 121.70 points or 1.17 percent.
"Despite a follow through buying in which the Nifty50 appears to have registered an intraday breakout as it went past previous swing high of 10,553 levels, it failed to register a close above the said hurdle," Mohammad said
The intraday trading range also remained narrower with 112 points. The rally may not sustain unless a strong closing is witnessed in the next session. The weakness will be confirmed on a close below 10,485. “In that scenario, the index may once again slip into sideways consolidation phase," he said.
If a strong move is witnessed above 10,600 then strength shall initially get expanded towards 10,670 and beyond that it will test 200-day moving average, whose value is placed at around 10,890, he said.
India VIX fell further by 5.73 percent to 26.50 levels, which is its at lowest level in four months, indicating a bullish sentiment.
The options data suggests that lower as well as upper band of immediate trading range for the Nifty has been moved higher at 10,300-10,800 against 10,200-10,600 in the previous session.
Maximum Put open interest was at 10,000 followed by 9,000 strike, while maximum Call open interest was at 11,500 followed by 11,000 strike. Call writing was seen in 10,900 than 11,000 strike while Put writing was seen at 10,200 then 10,000 strike.
The Bank Nifty opened positive at 22,133.80 and touched an intraday high of 22,344.85 in the first hour of the session. However, it wiped out all the gains and remained consolidative with sustained selling pressure at higher zones to touch the day's low of 21,890.50.
The index closed at 21,953.20, down 24.40 points and formed a bearish candle on the daily scale, underperforming the Nifty50."It needs to hold above 21,500 levels to witness an upmove towards the recent swing high of 22,500 then 22,750-23,000 zone while on the downside supports are seen at 21,250 then 21,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.