The Nifty50 snapped two-day losing streak with Nifty climbing above 12,100 levels on January 29 as bulls were back in action, following some relief move in the global markets amid worries of Coronavirus and ahead of Fed interest rate decision.
Once again, Nifty respected its crucial support of 50 DEMA and started rebounding, which is a positive sign for the market.
The index gained more than half a percent and formed small bullish candle which resembles an Inverted Hammer kind of pattern on daily charts.
An Inverted Hammer is a reversal pattern in which the index closes near its opening levels. It has a long upper shadow, small or no lower shadow, and a small body.
The formation of an Inverted Hammer candle indicates a pause in bounce back if follow up supply happens in next trading sessions. However, it still requires confirmation.
Experts expect the volatility to continue in the coming sessions ahead of the expiry of January derivative contracts and Union Budget.
The Nifty50 after opening sharply higher at 12,114.90 remained in an uptrend throughout the session and hit an intraday high of 12,169.60. The index settled at 12,129.50, up 73.70 points.
"Despite witnessing a strong opening, Nifty failed to build on to its opening gains which depicted a weak candle structure with a long upper shadow with a small bullish candle body which resembles an Inverted Hammer," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said today's surprising strength, post last Tuesday's breakdown, can be attributed to the lined-up events ahead in the form of expiry and budget.
"Hence, Nifty is likely to remain volatile even in next trading session with an element of uncertainty about market direction," he added.
"Purely if we go by technical levels then in next trading session if Nifty manages to sustain above 12,170 levels then it should head towards 12,272 levels. Similarly, on the downside 12,024 shall remain critical support breach of which shall drag down the indices towards 11,900."
However, considering the events ahead and volatile nature of the market, Mazhar Mohammad advised traders to remain neutral on the index.
On the options front, maximum Put open interest was at 12,000 followed by 12,100 strike, while maximum Call open interest was at 12,200 followed by 12,300 strike.
Put writing was seen at 12,100 followed by 12,150 strike whereas Call writing was seen at 12,150 followed by 12,250 strike with major Call unwinding at 12,100 strike.
Option data indicated that the Nifty could trade in a range of 12,050 to 12,200 zone.
India VIX fell 4.64 percent to 16.49 levels.
However, volatility likely to stay higher ahead of the upcoming Union Budget 2020, experts feel.
Bank Nifty opened higher but consolidated in the range of 250 points for the most part of the session. It closed 0.38 percent higher at 30,877 and formed a small-bodied candle on the daily scale and negated the formation of lower highs – lower lows after two trading sessions.
"Index is stuck in a wider trading range between 30,600 to 31,400 zone for past seven trading days as dips are being bought into while supply pressure was seen at higher band. Now it needs to continue hold above 30,800 to witness a bounce towards 31,100 then 31,250 levels. On the flip side, a sustainable move below 30,800 may drag the banking index towards its next support of 30,500 then 30,250 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
All sectoral indices, barring Pharma, closed in the green with Nifty FMCG index rising over a percent.