The Nifty50 rebounded after a day of correction and closed with half a percent gains on August 21, supported by banking & financials and positive Asian cues.
The broader markets continued to outperform the benchmark indices, with the midcap index rising half a percent and smallcap 1 percent.
The Nifty50 started off the day higher at 11,409.65 and remained in a narrow range through the session. It hit an intraday high of 11,418.50 and a low of 11,362.2 before signing off at 11,371.60, up 59.40 points.
Though it ended higher, the closing was lower than the opening tick so it formed a bearish candle on the daily chart.
The index, however, gained 1.7 percent for the week and formed a small bullish candle on the weekly scale, which resembled a Spinning Top on the weekly scale.
Spinning top is often regarded as a neutral pattern that suggests indecisiveness in the market. It can be formed in an uptrend as well as in a downtrend.
Experts expect consolidation to continue in the coming days unless the index decisively breaks 11,460 on the upside.
As market appears to be in a no-trade zone, traders should remain neutral, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in said. Intraday traders can consider shorting below 11,360 for a modest target of 11,290, with a stop above the intraday high.
The extremely narrow trading ranges of the last couple of days and lack of follow through is clearly highlighting that traders are clueless about the market’s direction, Mohammad said.
To retain bullish bias in the next session, the index should sustain above 11,362. If the bulls fail to do so, then the Nifty can induce selling pressure on an intraday basis with initial targets of 11,290. A close below 11,290 will damage the bullish sentiment, dragging down the Nifty to its 20-day exponential moving average placed around 11,200, Mohammad said.
If the index closes above 11,460, it will facilitate the expansion of the upmove towards 11,536 levels, he added.
India VIX fell by 4.46 percent to 19.70 levels. As the volatility has gradually been cooling down, the bulls seem to be in a strong position and there could be continuation of buy on decline strategy.
Options data suggests that in the coming days, the Nifty could trade in the 11,200- 11,500/11,600 range, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Maximum Put open interest was seen at 11,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 11,600 strike. Call writing was seen at 11,600 and 11,700 strike while Put writing was seen at 11,200 then 11,300 strike.
The Bank Nifty opened gap up and headed towards 22,350. It finally closed 300.15 points or 1.36 percent higher at 22,299.60 and formed a small bullish candle on daily charts.
For the week, the index gained 2.9 percent and formed a small bullish candle that resembled a Hammer pattern on the weekly scale, which indicated that declines were being bought.
The banking index has seen three exhausted gap in the last three sessions but held above 22,000 and a move towards 22,400 zone is giving an early sign of bullish consolidation breakout, Taparia said.
The Bank Nifty has to hold above 22,000 for an upmove towards 22,500 and 22,750 while on the downside, immediate support is seen at 21,750 then 21,400 levels, he said.Positive setup was seen in Asian Paints, Power Grid, Mahanagar Gas, Hero MotoCorp, HDFC Bank, Berger Paints, Sun Pharma, Ramco Cement, Siemens and UltraTech Cement while weak structure was seen in Escorts, Muthoot Finance and Amara Raja Batteries, he added.