Mazhar Mohammad advises traders to better off by giving a miss to the limited gains on the upsides, whereas weakness can be expected on a strong close below 12,300.
The Nifty, after a rangebound move, gained momentum in the last couple of hours of trade and ended January 14 at a record closing high despite the CPI inflation jumping to over five-year high in December.
The rally was largely led by positive global cues on increasing optimism ahead of the signing of the “Phase 1” US-China trade deal.
The index closed above 12,350 and formed a bullish candle on daily charts as closing was higher than opening value.
Experts expect the momentum to continue along with a consolidation and said 12,300 will be a crucial level for direction on either side.
One interesting thing visible on the charts was a buy signal triggered by the MACD indicator on the daily charts. Experts, however, see a limited impact as the index rallied for the fourth straight session.
The Moving Average Convergence/Divergence indicator is basically a refinement of the two moving averages systems and measures the distance between the two moving average lines.
India VIX fell by 2.57 percent to 13.91 levels. The sharp cut in VIX levels provides comfort to the bulls.
After opening flat, the Nifty dipped to 12,308.70 in the early trade but immediately recovered and traded in a narrow range before seeing record high of 12,374.25 in the last couple of hours. The index closed 32.80 points higher at 12,362.30.
"Though at this point in time, multiple technical parameters on lower time-frame charts are hinting at sideways move with limited upsides, as most of them are either in overbought zones or displaying negative divergences, weakness may not emerge instantly as there are no apparent sell signals," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told Moneycontrol.
"Moreover daily MACD generated a buy signal in today's session. However, its impact can be limited, as the market has already rallied in the last four trading sessions from the lows of 11,929."
Besides, a similar buy signal from MACD in last December at around 12,200 failed to add incremental gains to the Nifty, which topped out in succeeding two sessions, triggering a bigger correction from the highs of 12,293 to 11,929, he added.
For now, Mohammad advised traders to better off by giving a miss to the limited gains on the upsides whereas weakness can be expected on a strong close below 12,300.
Except banking and realty sectors, all other sectoral indices ended in positive territory.
On the options front, maximum Put open interest was seen at 12,000 followed by 12,200 strike, while maximum Call open interest was at 12,500 followed by 12,400 strike.
Marginal Call writing was seen at 12,400 strike; while some Put writing was seen at 12,300 and 12,200 strikes.
The Bank Nifty continued its underperformance for the second consecutive session and moved in the range of 200 points.
It started correcting from initial trades as open and high were the same. However, due to some pull-back moves in the latter half, the index trimmed off some of its losses and formed a small red body candle on the daily chart. It closed 0.33 percent lower at 32,071.70."Now it has to continue to hold above 31,900 to extend its move towards 32,500-32,600 zones and above that, it could start a fresh move towards 33,000. On the downside, support is now placed at 31,750 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.