Mazhar Mohammad said it looks prudent on the part of traders to refrain from creating short positions in anticipation of a corrective swing unless weakness gets confirmed in one or the other way
Nifty, after a choppy trade initially, gained strength in the last couple of hours of trade on March 19 and continued uptrend for the seventh consecutive session to close above psychological 11,500 level for the first time since September 14, 2018.
The index formed a bullish candle, resembling a 'Hanging Man' pattern on the daily chart. In fact, the Hanging Man pattern has been seen in the last two out of five sessions.
A consistent rally brought the market to overbought levels, hence the upside from hereon looks limited, experts said, adding the correction or sideways trade could be possible in coming sessions.
Nifty after opening higher at 11,500 remained volatile and hit an intraday low of 11,451.25, but managed to gain strength in the last couple of hours of trade and hit a day's high of 11,543.85. The index finally closed up 70.20 points at 11,532.40.
"Bulls continued to have upper hand as Nifty registered a positive close for the seventh session in a row before signing off the day with a 'Hanging Man' kind of indecisive formation," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said despite weak price behaviour of the last couple of sessions, trading remained positively biased as Nifty continued to make new swing highs on a daily basis.
Hence, it looks prudent on the part of traders to refrain from creating short positions in anticipation of a corrective swing unless weakness gets confirmed in one or the other way, he added.
Mazhar said with momentum oscillators trading at overbought levels accompanied with prices trading way above their short-term moving averages, he believes upsides for this market are limited. Sooner than later, the index should correct itself at least to align with short-term moving averages by kicking in a phenomenon called mean reversion.
India VIX moved down 2.41 percent to 16.49.
Nifty options: Maximum Put open interest (OI) was at 11,000 followed by 11,300 strike and maximum Call OI was at 11,500 followed by 11,600 strike.
Meaningful Put writing was at 11,500 followed by 11,400 strike while Call unwinding was at all the immediate strikes with minor Call Writing at 11,800 strike.
Option band signifies a shift in a higher trading range between 11,400 and 11,700 zones.
"Nifty index formed a bullish candle on the daily scale and has been forming higher highs, higher lows from past seven trading sessions. Now it has to continue to hold above 11,450 to extend its up move towards 11,600; while on the downside, support exists at 11,380," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Bank Nifty formed an Inside Bar on the daily scale but traded in a broader range of 29,550-29,800 for the most part of the session. The index closed 171.75 points higher at 29,767.85.
"It has been making higher lows from past thirteen trading sessions that suggest buying is witnessed at lower levels," Chandan said.Now it has to continue to hold above 29,500 to extend its momentum towards high of 30,000 then 30,200 while on the downside major support exists at 29,250, he added.