The Nifty50 started off the September series on a strong note as the index not only closed above the 21-day EMA (exponential moving average placed at 19,405) on September 1 but also gave a strong reversal with a bullish candlestick pattern on the weekly charts after the inverted hammer pattern formation in the previous week.
Hence, closing and sustaining above 19,500 in the coming days can open doors for 19,800 levels, with crucial support at the 19,250-19,200 area, which has been held so far by the market, experts said.
The inverted hammer pattern formed last week is a reversal pattern and the index confirmed this week with a decent bullish candlestick formation on the weekly scale after five red candles in the previous five weeks. The index gained 0.88 percent for the week.
On Friday, the Nifty50 formed a strong bullish candlestick pattern, which resembles a Bullish Engulfing kind of pattern on the daily timeframe, indicating strong sentiment and the power seems to be returning in the bulls' camp. The index opened flat at 19,258 and gradually extended uptrend to hit a day's high of 19,459. The index held on to the previous day's closing (19,254) throughout the session and settled at 19,435, up 182 points or 0.94 percent.
"Technically, today's action signalled a Bullish Engulfing pattern, but not a classical one. After showing a false downside breakout of 19250 levels on Thursday, the market seems to have reversed sharply on the upside," Nagaraj Shetti, technical research analyst at HDFC Securities said.
He feels the short-term trend of Nifty has turned up and one may expect further upside in the short term.
The next overhead hurdles to be watched around 19,600 and 19,800 levels in the next couple of weeks, while immediate support is placed at 19,350 levels, Nagaraj said.
With today's strong rally, the support and resistance shifted higher. The Option data indicated that 19,500-19,600 is expected the next key resistance area, which can decide the further rally in the market, with immediate support at 19,400 and then the 19,300-19,200 area.
On the options front, we have seen the maximum Call open interest at 19,600 strike followed by 19,500 strike with Call writing at similar strikes in similar sequence. On the Put side, the maximum open interest was seen at 19,300 strike followed by 19,400 strike and at 19,200 strike with writing at 19,300 strike then at 19,400 strike.
Bank Nifty
The Bank Nifty with a strong start to the September series, also formed a similar kind of candlestick pattern on the daily charts by taking support at 44,800 as well as a downward sloping support trendline. The index rose 1 percent or 447 points to 44,436.
For the week, it formed a bullish candlestick pattern with long upper and lower shadows, which resembles the High Wave kind of candlestick pattern on the weekly scale and registered half a percent gain, continuing the uptrend for the second consecutive week.
"Bank Nifty has held on to its 20-week moving average support (44,144) and also closed in the green. We expect the pullback to continue over the next week as well," Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas said.
He feels daily and hourly momentum indicator has a positive crossover which is a buy signal. He expects Bank Nifty to target levels of 45,000 from a short-term perspective.
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