The Nifty50 remained in a positive terrain throughout the session and gained more strength in the last hour of trade to close above its 200-day moving average on July 17, backed by rally across sectors barring IT.
The index closed above 10,900 for the first time since March 6 and formed a bullish candle on the daily charts as closing was higher than opening levels.
But the index did not look that strong on the weekly basis as it gained 1.2 percent and formed a Hanging Man pattern on the weekly scale.
A Hanging Man is a bearish reversal candlestick pattern usually formed at the end of an uptrend or at the top (around 7.2 percent rally in five consecutive weeks).
Generally, Hanging Man formation is an exhaustion sign, hence experts feel the Nifty has to hold 10,900 levels in the coming sessions to sustain the bullish trend, which can take the index above the 11,000-mark.
For the time, traders can remain long with a stoploss below 10,749 on a closing basis and look for a initial target of 11,250 levels, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
The Nifty50 opened higher at 10,752 and remained positive through the session to hit an intraday high of 10,933.45 in the last hour. The index closed at 10,901.70, up 161.70 points or 1.51 percent.
"The Nifty50 appears to have registered a breakout as it closed marginally above its 200-day moving average (10,870). Despite a close above the upper end of the recent consolidation zone, weekly charts are not looking that attractive. It is critical for the index to sustain above 10,900 levels to retain bullish bias in the next couple of trading sessions," Mohammad said.
As long as the index sustains above 10,900, one can look for a reasonable target placed around 11,250 levels, he said.
If the index closes below 10,749, then it will bring back uncertainty and in that case, the Nifty may remain sideways in the 10,900- 10,560 levels, he said.
India VIX fell by 4.74 percent to 24.15 levels, which remained supportive factor for the market.
Options data indicated that the Nifty50 could trade in the range of 10,600 to 11,200 levels on the immediate basis.
On optiosn front, maximum Put open interest was at 10,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 11,000 strike. Call writing was seen in 11,100 and 10,800 strikes, while Put writing was seen at 10,800 and 9,800 strike.
The Bank Nifty opened flattish but consolidated in between 21,500 and 21,800 levels for most part of the session. However, it witnessed strong recovery in the last hour to extend gains towards 22,000 levels.
The index finally settled at 21,966.80, up 369.65 points, or 1.71 percent, and formed a bullish candle on the daily scale.
However, it lost 1.9 percent for the week and formed a bearish candle on weekly scale, "which suggests buying is visible at lower levels but resistance are intact at higher zones to restrict its upside momentum”, said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
"Now the index needs to hold above 21,500 levels to witness an upmove towards 22,500 while on the downside, support is seen at 21,200 levels," he added.
Taparia said positive setup was seen in stocks like HDFC Bank, Bajaj Finance, BPCL, Muthoot Finance, Reliance Industries, M&M, ICICI Prudential, Container Corporation, Sun Pharma, Cadila Healthcare, etc while marginal weak structure was seen in Nestle and TCS.
Disclosure: Reliance Industries Ltd is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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