Technical View: Nifty tops 11k to form bullish candle; use every dip to create longs

Nifty after initial volatility gained strength and rallied to a two-week closing high on August 26 after relief measures announced by the government and amid likely talks between US and China over the trade deal.

The index closed above psychological 11,000 level and formed bullish candle on daily charts followed by a Piercing pattern. Nifty opened sharply higher at 11,000.30, but immediately fell to hit an intraday low of 10,756.55. After initial hour, the index started gaining strength and extended rally as the day progressed to touch a day's high of 11,070.30. It closed 228.50 points or 2.11 percent higher at 11,057.90.

Experts feel the market might have formed near term bottom at the recent corrective swing low and after today's rally, there could be a consolidation or a bit of profit booking in coming sessions.

"Strong recovery in the last two trading sessions is clearly hinting at a higher possibility of registering a near term bottom at recent corrective swing low of 10,637. Hence, any dip can be considered as an opportunity to create fresh longs," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said if Nifty consistently trades above 11,070 for at least one hour on August 27 then it can extend its rally initially towards 11,181 and thereafter a bigger target of 11,272 can't be ruled out.

On the downside, today's low of 11,756 shall remain critical support going forward below which positive momentum shall fizzle out, Mazhar Mohammad said.

India VIX fell 4.01 percent to 16.65.

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

Meaningful Put writing is at 10,900 followed by 11,000 strike while minor Call writing is at 11,200 then 11,100 strike. Options data suggests the Nifty could trade in a range of 10,900-11,200.

Bank Nifty opened gap up by 700 points but drifted sharply towards 26,900 levels in the first hour of the trading session. However, it recovered sharply from lower levels and gained nearly 1,000 points to close near 28,000.

"The index formed a Hammer candle on the daily scale with long lower shadow as declined is being bought into and negated its lower highs-lower lows formation after five trading sessions. Now it has to hold above 27,750 to witness an upmove towards 28,388, then 28,500; while on the downside supports are seen at 27,500 then 27,350," Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.