Short-term traders should initiate long positions only on a strong close above 11,322, Mazhar Mohammad of Chartviewindia.in said.
It was another lacklustre day for the Nifty50 which ended the session moderately lower on August 12, forming an indecisive small-bodied candle on daily charts again.
The index remained lower for most of the session amid uncertainty over US stimulus measures and US-China tensions.
But the good thing is that the volatility has been declining consistently, which generally gives support to the bulls and indicates that the downside, if it happens, will be limited.
India VIX fell by 2.41 percent to 20.84 levels. "Volatility has been falling for the last seven consecutive sessions and the gradual decline in VIX suggests that the bulls are using any decline as a buying opportunity, while the overall trend remains bullish," Chandan Taparia of Motilal Oswal said.
Short-term traders should initiate long positions only on a strong close above 11,322 levels, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in said. Intraday traders can consider shorting below 11,240 and look for modest targets of 11,180 or so.
The Nifty50 opened lower at 11,289 and traded in the range of 11,322 and 11,242.65 before closing 14 points lower at 11,308.40.
The Nifty50 traded in a narrow range of 80 points. Trading bias seemed to have turned negative for the near term as the index failed to get past the previous session’s high but breached its low, Mohammad said.
If the Nifty fails to get past 11,322 in the next session and slips below 11,242, then the downswing will get extended towards 11,140 levels. A breach of it on the closing basis will confirm short-term trend reversal bears’ favour, he said.
Unless the bulls witness a strong close above 11,322, with wide intraday trading range, upward momentum will not gather pace and on such a close, strength can be expected to expand towards 11,450 levels, he said.
Options data suggests that the Nifty may witness an immediate trading range of 11,000-11,500 for the next few days.
Maximum Put open interest was at 11,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Minor Call writing was seen at 11,400 and 11,300 strike while Put writing was seen at 10,400 then 10,500 strike.
The Bank Nifty also opened lower and drifted towards 22,000 in the first hour but buying was seen at lower levels. It consolidated between 22,100 to 22,300 zone for the most part of the day and formed a small bullish candle on the daily scale. The index closed 36.80 points higher at 22,264.
"The index negated the formation of higher lows after four trading sessions but overall trend is positive with buy-on-dips strategy. Mechanical indicators are holding their bullish crossover and requires a follow-up buying to confirm the next momentum," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.
"Now it has to hold above 22,000 levels to witness an upmove towards 22,500 then 22,750, while on the downside, immediate support is seen at 21,750 then 21,500."Taparia said a positive setup was seen in HCL Technologies, SBI, Tech Mahindra, Hero Motocorp, Bajaj Auto and JSW Steel. Weak structure was seen in Cipla, Kotak Mahindra Bank, Britannia, Hindalco and Dr Reddy's Labs.