Mazhar Mohammad advises traders to focus on stock-specific opportunities with a market stop below 10,900 level.
The Nifty bounced back after a day of steep fall and closed a percent higher on August 14, driven by global and domestic cues. The US’ move to delay tariffs on some Chinese goods and easing in some corporate social responsibility (CSR) rule lifted trader sentiment on the Independence Day eve.
The index closed above 11,000 market and formed small bearish candle, which resembles a bullish harami pattern on daily charts.
A bullish harami pattern is formed at the bottom of a downtrend or near a significant support zone. This pattern is made up of two candlesticks. On Day One long bearish candlestick is formed, while on Day Two a small bullish candle is formed. The bigger bearish candle of Day One and a comparably small bullish candle of Day Two represent a strong trend reversal.
The sharp volatility (up and down) indicated that the market could remain rangebound in coming sessions unless index breaks the range of 11,145–10,901 on either side, experts say.
The Nifty opened higher at 11,029.40 and remained in uptrend throughout session amid a bit of volatility. The index hit an intraday high of 11,078.15 and closed 103.50 points higher at 11,029.40.
The market will remain shut on August 15 for Independence Day.
"Strong comeback of the Nifty50, without violating preceding sessions low, is clearly suggesting that big sell-off witnessed on August 13 can be owing to global factors. Hence, going forward if normal trends catches up with markets then it should ideally consolidate in the range of 11,145–10,901 levels for couple of sessions going forward," Mazhar Mohammad, Chief Strategist, Technical Research and Trading Advisory, Chartviewindia.in, told Moneycontrol.
He said for the last 27 trading sessions, index appeared to be moving in a well-defined downsloping channel with multiple touch points. A close above 11,078-level should suggest some strength in the index, where as a close above 11,145 would accelerate upward momentum.
For sideways phase to continue with positive bias, the Nifty should sustain above 10,900-level, breach of which would threaten recent corrective swing low of 10,782 level, he added.
He advised traders to focus on stock-specific opportunities, with a market stop below 10,900 level. Once this near term critical support of 10,900 was breached then fresh shorting opportunity would arise, Mohammad said.
On the options front, maximum put open interest is at 11,000 followed by 10,700 strike, while maximum call OI is at 11,000 followed by 11,500 strike.
Minor call unwinding is at immediate strike while put writing is at 11,000 then 10,900 strike. Option data suggests the Nifty could trade in range of 10,800-11,200 level.
India VIX fell by 8 percent to 16.35 level.
Sharp cut in volatility index favoured the bulls but VIX needed to hold below 15 zones to get the short-term stability and bounce-back move, said Chandan Taparia, Associate Vice President, Analyst-Derivatives, at Motilal Oswal Financial Services.
The Bank Nifty formed an inside bar on daily scale as it traded in the range of 27,700 to 28,100 zones on its truncated weekly expiry day. The index closed 1.05 percent higher at 28,019.20.
“It has multiple support near to 27,500-27,350 zones while hurdles at 28,350-28,500 zones. It has to give a range breakout with follow up activities for the next leg of move. Now, it has to hold above 28,000 zone to witness a bounce towards 28,350 then 28,500 zones while support exists at 27,750 then 27,500 zones," Taparia said.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.