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Technical View | Nifty forms large bullish candle, strength confirmation seen only above 17,000

The rally was supported by metals, FMCG, IT shares and Reliance Industries. Selling pressure on banks and auto stocks, however, capped the upside

February 28, 2022 / 05:17 PM IST

The Nifty pared losses and gained strength in the last hour of trade to close higher on February 28, as reports of Russia and Ukraine talks lifted the market sentiment.

The Nifty opened lower at 16,482 and slipped to 16,356 in the morning trade but started recovering after a few hours. The rally was seen in the last hour helped the index close at 16,794, up 135 points.

As the index closed way above its opening levels, it formed a large bullish candle on the daily chart. Reports of Russia-Ukraine talks seem to have strengthened the bulls but it will continue only if the index decisively crosses its 200-day simple moving average as well as the crucial 17,000-mark in coming sessions, experts said.

Volatility remained high. India VIX, the fear index, was up 6.84 percent to 28.57 levels. It has to cool below the 20 mark to support the strength seen in the last two sessions, experts said.

Also read: Taking Stock | Market ends higher on another volatile day, metals shine

Close

The rally was supported by metals, FMCG, IT shares and heavyweight Reliance Industries. The upside, however, was capped by banks and auto stocks that saw selling pressure.

"Smart recovery from the intraday lows of 16,356 levels can be a morale booster for bulls, hinting at some kind of higher bottom at the said low. However, the immediate hurdle for the index is placed around 16,900 levels in the form of the 200-day simple moving average," said Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

If the index sustains above 16,356, the index would eventually move towards 17,027 to bridge the large bearish gap placed in the zone of 17,027 and 16,705 registered on February 24.

Also read: Gainers & Losers: Five stocks that moved the most on February 28

“A close below 16,356 levels shall dissipate the current bullish momentum by resuming the weakness in the index," he said.

The current upward momentum should be considered a pullback attempt only after the Nifty manages to sustain above 17,000 for a couple of sessions, Mohammad said.

On the options front, the maximum Call open interest was seen at 17,000 and 18,000 strikes, while maximum Put open interest was seen at 16,500 and 16,000 strikes.

Also read: Russia-Ukraine crisis fires up commodity prices

Marginal Call writing was seen at 17,000 and 16,800 strikes, while marginal Put writing was seen at 16,500 and 16,400 strikes. This options data indicates that the Nifty could trade in the 16,400-17,000 range in the near term.

Banking index

The Bank Nifty also opened negative at 35,939 and underperformed the Nifty. Select PSU banking stocks remained resilient but the index closed 225 points lower at 36,205 due to pressure in private banks. The index formed a Bullish Hammer candle on the daily scale.

"The Bank Nifty has to hold above the 36,000-mark to continue the up move towards 36,500 and 36,750 levels, while on the downside, support is seen at 35,500 followed by 35,250 levels," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.

Also read: Passenger, commercial vehicle sales likely grew in February; muted customer sentiment may hit two-wheeler numbers

There was a positive setup in GAIL, Hindalco, Jindal Steel, Tata Steel, Power Grid Corporation of India, Vedanta, Coal India, Bharat Electronics, Marico, Apollo Hospitals, NALCO, Trent, Dabur, Reliance Industries, L&T Technology, Titan, PVR and ICICI Bank. However, weakness was seen in Biocon, Strides Pharma, HDFC Life, Axis Bank, TVS Motor and M&M, he said.

Disclosure: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Sunil Shankar Matkar
first published: Feb 28, 2022 05:17 pm
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