Technical View: Nifty forms bullish candle, falling VIX could extend bullish momentum

The Nifty50 started off a week on a positive note and remained in an uptrend throughout session to end at record closing high on June 7, supported by IT, select banks, auto and FMCG stocks. Positive global cues and further decline in Covid cases with easing restrictions by several states also boosted sentiment.

The index formed bullish candle on the daily charts as the closing was higher than opening levels. Experts expect the index to hit 15,900 levels soon if it goes beyond 15,773 levels.

For the time being, despite market is inclining upwards, Mazhar Mohammad of Chartviewindia advised traders to remain neutral on index by shifting focus to stock specific opportunities.

The volatility also cooled down further, which supported the market sentiment. India VIX fell by 2.34 percent from 15.94 to 15.56, the lowest level of last 17 months since February 2020. "The falling VIX could extend the bullish market momentum towards new high territory," Chandan Taparia of Motilal Oswal said.

The Nifty50 opened higher at 15,725.10 and after initial volatility gradually extended gains to hit a record high of 15,773.45. The index rallied 81.40 points to end at record closing high of 15,751.70.

"Albeit bulls opened the week on a positive note, comfort level seems to be missing in the market, as trading range remained somewhat narrower with 95 points before signing off the session with an indecisive formation," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

"Though there are no apparent sell signals, at this point in time, narrow trading ranges accompanied with overbought levels can be a harbinger of weakness going forward which will be confirmed if Nifty closes below 15,678 in next session whereas a close below 15,590 can trigger a sharp profit booking," he said.

According to him, if bulls manage to push the index beyond 15,773 levels then the strength shall get expanded towards 15,850 – 15,900 levels where some resistance can be expected from the potentially evolving channel.

On option front, maximum Put open interest was seen at 15,000 followed by 14,500 strike while maximum Call open interest was seen at 16,000 followed by 15,500 strike. Minor Call writing was seen at 15,800 then 16,100 strike while Put writing was seen at 15,700 then 15,100 strike. Option data indicated that an immediate trading range for the Nifty could be 15,500 to 16,000 levels.

Bank Nifty opened positive at 35,460.80 but remained consolidative in a range of 200 points throughout the day, before closing 152 points higher at 35,443.70. It formed a Doji candle or a Harami Cross candle on daily scale.

"Bank Nifty has to hold above 35,250 levels to witness an upmove towards 35,750 and 36,000 levels while on the downside support is seen at 35,000 and 34,750 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

On stocks front, "bullish setup was seen in Torrent Power, Adani Ports, Tata Power, NTPC, TVS Motor, BHEL, PVR, Gail, Tata Motors, UltraTech Cement, Ambuja Cement, REC, Berger Paints, Tata Consumer, L&T and TCS while weakness was seen in NMDC, Bajaj Finance, PNB, Apollo Hospitals and Havells," he added.