Technical View | Nifty forms Bullish Harami pattern, trend may turn strong if index stays above 19,750

The Nifty forms a Bullish Harami pattern, indicating that the bearish trend may be reversing.

The Nifty50 rebounded sharply after a day of severe correction and closed with more than 100 points gains on September 29, the first day of the October series. The index also defended 19,550 which coincides with the 50-day EMA (exponential moving average. Hence 19,500-19,550 can be a crucial area for downside in the coming week, while the 19,750 is expected to be the critical area for further rally, experts said.

The Nifty50 opened higher at 19,581 and remained in a positive terrain throughout the session after positive global cues. The index hit an intraday high of 19,726 in the last hour of trade, but saw some profit-taking before closing the day with 115 points gains at 19,638.

The index has formed a bullish candlestick pattern with a long upper shadow on the daily charts and traded within the previous day's range, which resembles a Bullish Harami kind of candlestick pattern formation at the downtrend, indicating that the bearish trend may be reversing. Generally, the high and low of this candle are important for following sessions to know the further trend.

The Nifty ended September with 2 percent gains, following a weak August closing. The recent selling pressure was halted around the 50-day EMA. However, "we need to close above 19,750 to witness a decent rally over the short term. A close or sustained move above 19,750 might take Nifty on a ride towards 20,500-20,700," Rupak De, senior technical analyst at LKP Securities said.

On the flip side, a fall below 19,470 might trigger the resumption of the downtrend, he feels.

On the weekly basis, the index lost 0.2 percent and formed a small-bodied bearish candlestick pattern with a minor upper shadow and long lower shadow on the weekly charts.

As per Options data, the Nifty may face next resistance at 19,800, with crucial support at 19,600-19,500 area.

The maximum Call open interest was seen at 19,800 strike, followed by 19,700 & 20,200 strikes, with meaningful Call writing at 19,800 strike, then 20,200 strikes, while the maximum Put open interest was visible at 19,600 strike, followed by 19,500 strike, with Put writing at similar strikes in same sequence.

The Bank Nifty also witnessed a pullback and as a result, it managed to close around the 20-week moving average (44584) which is a positive sign. The index hit the previous day's high but failed to sustain the same and formed a small-bodied bullish candlestick pattern with long upper shadow & small lower shadow on the daily scale.

The index settled at 44,585, up 284 points on the first day of the new monthly F&O series, while on the weekly timeframe, it shed 27 points and formed a Doji sort of candlestick pattern, indicating indecisiveness among bulls and bears about future trend ahead of RBI monetary policy next week. It was after a big bearish candle in the previous week, when the index tanked 3.5 percent.

Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas believes that the Bank Nifty is witnessing a loss of momentum on the downside which is evident from the positive divergence on the hourly time frame.

On the upside, he expects a pullback towards 45,000 – 45,200 zone from short-term perspective.

The volatility cooled down considerably, giving more comfort to bulls. The fear index, India VIX fell by 10.68 percent to 11.45 levels.