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Technical View | Nifty forms bullish candle, next critical hurdle seen at 16,750

With the decisive close above the 16,400 mark and also surpassing 16,600 on the same day, the market sentiment turned positive, hence if the index crosses and sustains the 200-day exponential moving average (16,750) then the next target would be above the 17,000 mark, experts said.

May 30, 2022 / 05:05 PM IST

The Nifty50 opened sharply higher above 16,500 and stayed strong throughout the session to close with more than 300 points gains on May 30, extending gains for the third straight day, following positive global cues and a fall in the US dollar index.

The 50-share index has formed a bullish candle on the daily charts as the closing was higher than the opening levels. With the decisive close above the 16,400 mark and also surpassing 16,600 on the same day, the market sentiment turned positive. Hence, if the index crosses and sustains a 200-day exponential moving average (16,750) then the next target would be above the 17,000 mark, experts said.

The volatility index (VIX) falling below the crucial 20 mark is a supportive factor for the market. On Monday, the fear index closed at 19.98 levels, down 6.98 percent. If it sustains below 20 levels, it could support bulls further in the coming days.

The broader markets also gained strength as breadth was in favour of bulls. The Nifty Midcap 100 and Smallcap 100 indices have climbed 2.4 percent and 3 percent, respectively as about three shares advanced for every declining share on the NSE.

The Nifty50 saw a gap-up opening at 16,528 and climbed up to 16,695, an intraday high, before settling higher by 309 points or 1.9 percent at 16,661, the highest level since May 5 this year.

Close

"Nifty50 seems to have registered a breakout with a strong close above its immediate hurdle of 16,400 levels. In this process, it also successfully bridged the bearish gap registered on May 6, which is present between 16,484 and 16,651 levels. Hence, initially, the upswing shall expand further and test its 200-day exponential moving average, which is around 16,750 levels," Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.

He further said in the case, if Nifty manages to close above 16,750 levels then the next target shall be around 17,100 levels.

On the downside, the market expert said Monday's gap zone between 16,506 and 16,370 shall remain critical support going forward and should present a better entry point on dips.

For the time being, traders should make use of any minor dip into the zone of 16,600 to 16,550 levels to create fresh longs with a stop-loss below 16,500 levels and look for a target of 16,750, Mazhar Mohammad advised.

Since it's the beginning of the new series, options data is scattered at various far strikes. Maximum Call open interest was seen at 17,000 strike followed by 16,300 strike while maximum Put open interest was seen at 16,000 strike followed by 16,300 strike.

Call writing was seen at 16,600 strike then 16,700 strike while Put writing was witnessed at 16,500 strike then 16,600 strike. Option data indicated that the Nifty could trade in a range of 16,200 to 17,000 levels in the coming days.

The Bank Nifty also stayed higher throughout the session as it opened with more than 300 points gains at 35,959 and rose up to 36,084, an intraday high. Finally, it closed with 214 points gains at 35,827 and formed a bearish candle on the daily charts as the closing was lower than opening levels.

"Now it has to continue to hold above 35,750 levels to extend up move towards 36,300 and 36,500 levels while on the downside, support exists at 35,500 followed by 35,250 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

On the stocks' front, the market expert said the positive setup was seen in Jubilant Foodworks, Dixon Technologies, City Union Bank, IRCTC, Crompton Greaves Consumer Electricals, DLF, United Spirits, Coforge, Persistent Systems, Aarti Industries, Indian Hotels, Mindtree, L&T Infotech, M&M, Syngene International, Bata India, Titan, Deepak Nitrite, Aditya Birla Fashion & Retail, Berger Paints, M&M Financial Services, Navin Fluorine International and Infosys.

However, weakness was seen in Jindal Steel & Power, Kotak Mahindra Bank, and InterGlobe Aviation, he added.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: May 30, 2022 05:05 pm
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