Technical View: Nifty forms Long White Day candle, 50 DMA crucial for further up move

The Nifty 50, on September 20, posted its biggest single-day gain in the last 10 years, closing above 11,250 levels with a massive 5.3 percent surge.

The booster shot by Finance Minister Nirmala Sitharaman to revive the economy lifted sentiment. Corporate tax has been cut to 25 percent from 35 percent (without exemptions), and minimum alternate tax reduced to 15 percent. New companies incorporated after October 2019 will pay 15 percent tax.

The index has broken a 25-day consolidation to close above its critical averages like 50- and 200- day moving averages, forming a large bullish candle that resembles a Long White Day kind of pattern on daily charts. A bullish candle formation was also seen on the weekly scale.

The possibility of some consolidation or profit booking could be possible after a sharp run-up, but the sustenance of 50-day moving average (11,117) going forward can take Nifty to higher levels, experts feel.

After consolidating early on and hitting the day's low of 10,691 in the opening hour, the Nifty 50 rebounded gradually and immediately gained solid strength to hit the day's high of 11,381.90. The index closed 569.40 points or 5.32 percent higher at 11,274.20, the highest level since July 26 this year.

"Nifty50 registered a Long White Day kind of formation as our FM bowled a ‘doosra’ which appears to have badly caught the bears on the wrong foot leaving them licking their wounds. As a result, bulls erased 25-day old larger congestion zone placed between 11,180–10,630 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in said.

He said this move clearly appears to have changed the tide in the favour of bulls which may result in a durable bottom placed around 10,640 levels.

However, the index needs to at least sustain above its 50-day moving average (11,117) which can also confirm strength in this counter.

However, in the next couple of trading sessions, owing to this huge upmove of 5 percent, there should be some profit booking which should ideally pull down the index, he added.

He advised traders to wait for some correction before initiating long positions without chasing the index at this point in time. On corrections, as of now, it looks that the zone of 11,180–11,140 can be an ideal opportunity to go long, he said.

India VIX fell by 0.96 percent to 15.40 levels. VIX has not fallen much comparatively as Call Implied Volatility has spiked because of the sudden market spike, and a fall below 14 levels could convince positive market momentum.

On the options front, maximum Put open interest is at 11,000 followed by 10,800 strike while maximum Call open interest is at 11,200 followed by 11,300 strike.

Call writing was seen at 11,600 followed by 11,400 strike while Put writing was seen at 11,000 followed by 11,200 strike. Options data suggests a shift in trading range for Nifty to 11,000-11,500 levels.

Bank Nifty opened positive and witnessed sustained buying interest throughout the session. The index rallied 2,223.90 points to close at 28,981.55 and formed a big bullish candle on daily as well as on a weekly scale.

"The index surpassed its crucial hurdle of 28,500 levels. It recorded the biggest intraday gain ever since its incorporation as it surged nearly 10 percent. Now it needs to hold above 28,500 levels to witness a momentum towards 29,500 then 30,000 levels while on the downside supports are seen at 28,388 then 28,000 levels," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.