The Nifty50 retained the uptrend for the third consecutive session and closed above the 50-day simple moving average on May 7, backed by metals and HDFC group stocks.
The index started off the day at 14,816.85 and stayed higher through the session. It rose 98.40 points to 14,823.20 after hitting an intraday high of 14,863.05 and a low of 14,765.50.
It formed a Doji candle on the daily chart as the closing was near its opening levels and a bullish candle on the weekly scale. Experts say that declines are being bought while hurdles are intact at higher zones. The index gained 1.3 percent during the week.
Traders should wait for further strength before initiating fresh long positions in the index, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia told Moneycontrol.
India VIX fell by 5.52 percent from 22.03 to 20.82 levels, which supported the bullish bias. "India VIX needs to hold below 20 to again attract bullish stance," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said
The technical picture appears to be tilting slightly in favour of the bears as the Nifty registered a second consecutive bullish candle on weekly charts, hinting at strong base formation around 14,420 levels, Mohammad said.
"Moreover, on daily charts, the Nifty not only closed above its 50-day simple moving average but daily MACD generated a buy signal after a long gap, suggesting that underlying trend may be strengthening in favour of bulls," Mohammad told Moneycontrol.
Despite this, the price action remained narrower inside the point trading range, which is a cause for concern as it depicts a weak candle with a Doji kind of indecisive formation, he said. Hence, the Nifty may not be completely out of the woods unless it registers a strong close above 15,000, Mohammad said.
It is critical for the index to sustain above the day's minor bullish gap area present between 14,765 – 14,744 to retain a bullish bias going forward, as a close below 14,744 in the next couple of sessions can again drag the trend into sideways consolidation mode with negative bias with initial targets of 14,500 levels.
On the option front, maximum Put open interest was seen at 14,000 followed by 13,500 strike, while maximum Call open interest was seen at 15,000 followed by 15,500 strike. Call writing was seen at 15,500 strike, while Put writing was seen at 14,000 then 14,700 strike. The options data indicates that the Nifty could see a wider trading range of 14,400 to 15,200 levels in coming sessions.
The Bank Nifty opened gap up at 33,041.65 but cascaded down since its opening levels. Banking stocks faced some pressure that saw the index test 32,750. It closed at 32,904.50, up 76.70 points, but formed a bearish candle on the daily scale as it closed below its opening levels. During the week, the index gained 0.4 percent and formed a bullish candle on the weekly scale.
"The index has to hold above 32,750 to witness an upmove towards 33,333 and 33,500, while on the downside, support is seen at 32,500 and 32,250 levels," Taparia said.
On the stock front, bullish setup was seen in NALCO, NMDC, SAIL, Tata Steel, Vedanta, Hindalco, Glenmark Pharma, JSW Steel, Muthoot Finance, LIC Housing Finance, Bajaj Finserv and Mcdowell. Weakness was seen in SRF, Deepak Nitrite, Jubilant Foodworks, Piramal Enterprises, Federal Bank, MRF and M&M Financial, he added.