The market started off the October series on a strong note, as the Nifty50 rebounded after a day of steep correction and extended the rally in the afternoon to close above the psychologically important 11,000-mark on September 25 on expectations of a stimulus package ahead of the festival season.
After opening higher at 10,910.40, the Nifty extended uptrend to hit an intraday high of 11,072.60. It signed off the session 244.80 points or 2.27 percent, higher at 11,050.30.
The index recouped most of the previous day's losses due to buying across sectors with 2-3 percent rally and formed a bullish candle on the daily charts. But for the week, the index lost 4 percent and formed a bearish candle on the weekly scale.
The rally may continue till 11,300 given the formation of a temporary bottom at around 10,800, which is around 200-DEMA, experts said.
With twin momentum oscillators generating buy signal, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in advised traders to make use of dips to create long positions for a target of 11,300 with a stop below 10,800 on a closing basis.
India VIX fell by 12.06 percent from 23.51 to 20.67 levels, which also gave comfort for a bounce-back move.
"Strong rally in today's trading session from around its 200-day moving average is hinting that a temporary bottom may be in place around 10,790 levels," Mohammad said.
The chart structure on weekly time frame was hinting that the correction from the highs of 11,794 unfolded in the form of a Zig Zag in Elliot Wave parlance and might have culminated at a low of 10,790 levels, he said.
Usually, when one corrective structure ends, it paves the way for a counter-trend rally and in the current case, it can get extended up to 11,300 levels, he said.
Maximum Put open interest was seen at 10,500 followed by 10,000 strike while maximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was seen at 11,300 and 11,600 strikes while Put writing was seen at 10,500 then 10,600 strikes.
The options data suggests a wider trading range for the Nifty between 10,500 and 11,500 zone while the immediate range shifted to 10,800-11,300.
The Bank Nifty managed to hold its previous day's low and finally negated its lower top–lower bottom formation after six sessions. It gained 525.45 points or 2.57 percent to come close to its crucial 21,000-mark at 20,982.30.
The index formed a small bullish candle on the daily scale and a bearish one on the weekly scale. It corrected 4.8 percent for the week.
"Now, the Bank Nifty needs to hold above 21,000 levels for a bounce towards 21,500 then 21,750 while on the downside, support is seen at 20,750 then 20,400," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
Positive setup was seen in Apollo Hospitals, TCS, HCL Technologies, Infosys, Maruti Suzuki, ICICI Bank, Bajaj Finance and IndusInd Bank while weakness was seen in SBI Life, BPCL and UPL, he added.