The Nifty remained volatile on July 7, but strength in late trade helped the index close higher for the fifth consecutive session supported by banking, financials and technology stocks.
The index opened positive above the 10,800 mark, at 10,802.85, but wiped out all gains and hit an intraday low of 10,689.70 in late morning trades. In afternoon, the index gradually recouped losses amid volatility and gained strength in late trade to close 36 points higher at 10,799.70.
It closed near its opening levels and witnessed an indecisive formation, which resembles a Doji kind of pattern on the daily charts.
The falling volatility also continued to support bulls as India VIX declined 0.39 percent to 25.10 levels.
The Nifty has gradually been moving higher, with the bulls having the upper hand, but it has been quite volatile in the last three-to-four sessions which indicates that the index could be waiting for major breakout on either side, experts told Moneycontrol.
Considering the sideways and volatile nature of the current phase, Mazhar Mohammad of Chartviewindia.in advised traders to buy only on a close above 10,900 levels, whereas shorting can be considered on a strong weakness below 10,689 levels.
"Considering the price behaviour of the last four trading sessions, it appears that the Nifty is awaiting either a breakout or breakdown, which shall usher in a swift move based on the direction of breakout," he added.
Mohammad said that while the technical oscillators are only pointing to the market's overbought nature without any accompanying sell signals, a sideways move could be expected going forward unless the Nifty registered a strong close above 10,886 levels. "In that scenario, strength may get extended to 11,250 levels."
On the downside, if the index closes below 10,690, then it will confirm the weakness, thereby triggering a fresh leg of downswing, with initial targets placed around 10,500 levels, he added.
On option front, maximum put open interest was seen at 10,000, followed by 9,500 strikes, while maximum call OI was seen at 11,500, followed by 11,000 strikes. Call writing was seen in 11,200, then 11,300 strikes while put writing was seen at 10,500 then 10,700 strikes.
Option data suggests an immediate trading range for the Nifty could be between 10,400 and 11,060 levels.
Bank Nifty managed to hold 22,000 in morning trade and witnessed a strong move towards 22,700 by surpassing its previous hurdle of 22,500 in afternoon trade. It has seen its highest daily close in the last 75 trading sessions on strong buying interest in most banking counters.
The index closed 429 points, or 1.93 percent, higher at 22,628, outperforming the benchmark Nifty and formed a bullish candle with respect to its rising trend line on a daily scale.
"Now, it has to continue to hold above 22,000 levels to witness an up move towards 23,000. On the downside, supports are seen at 21,500 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.
A positive setup was seen in stocks like M&M Financial Services, Bajaj Finance, Ujjivan Financial Services, IndusInd Bank, Eicher Motors, Escorts, ICICI Bank, Infosys, Axis Bank, Dabur, Havells and Mindtree while weakness was seen in Indraprastha Gas, Mahanagar Gas, Power Grid Corporation of India, Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), Sun TV.