Considering the indecisive formations of the past two sessions, traders should remain cautiously optimistic, with a stop loss below 11,100 level, says Mazhar Mohammad of Chartviewindia.in.
The Nifty50, after a day of consolidation, gathered steam and reclaimed the crucial 11,200 level on August 6 after the Reserve Bank of India kept rates unchanged but allowed one-time loan restructuring along with more liquidity measures for stressed sectors.
The index closed near its opening level and hence formed a Doji candle on the daily chart. A Doji candle indicates there is some indecisiveness among the bulls and the bears and bounces were being sold in the absence of follow-up buying interest.
Considering the indecisive formations of last two trading sessions, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in advised traders to remain cautious with a stop loss below 11,100 levels.
India VIX fell by 1.78 percent to 23.15 levels. Decline in VIX from its recent bounce of 25.69 suggests that the bulls are using any decline as a buying opportunity and overall trend could remain bullish, experts say.
After a strong opening of 11,185.70, the Nifty50 touched an intraday high of 11,256.80 after the RBI policy announcement but erased some gains to close near its opening levels. The index settled at 11,200.20, up 98.50 points.
“It is critical for the index to sustain above 11,127 levels in the next trading session to retain positive bias as the breach of said level can attract selling pressure on intraday basis, with a modest target present in the zone of 11,064 – 11,024 levels," Mohammad said.
However, as trading bias is in the favour of the bulls, if they manage to push and hold the index above 11,256, then the target can be the retest of recent swing high present around 11,341, he said.
The options data indicates a shift in the immediate trading range of the Nifty to 11,000-11,400 levels for the coming few days from 10,800-11,300 in the previous session.
Maximum Put open interest was at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Minor Call writing was seen at 11,600 and 11,700 strikes while Put writing was seen at 11,000 then 10,800 strike.
The Bank Nifty opened positive but after a roller-coaster ride, it again failed to hold above 21,900 and drifted towards 21,500. The index closed 132.65 points higher at 21,642.60 but formed a Doji candle as it closed near the opening level and hovered near its 50-DEMA, which indicates a tug of war at key trading levels.
"Mechanical indicators are on the verge of turning upside and it requires a decisive follow-up to confirm the next momentum. If it manages to hold above 21,500 levels, then bounce could be seen towards 22,000, then 22,250 levels, while on the downside, immediate support is seen at 21,250 then 21,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in NIIT Technologies, Aurobindo Pharma, Glenmark Pharma, Tata Steel, Infosys, TVS Motor, ICICI Prudential, Jubilant Foodworks and TCS, while weak structure was seen in BHEL, InterGlobe Aviation and Canara Bank, he added.