Technical View | 19,800 seems to be crucial zone for further direction on either side in Nifty50

Bank Nifty's trading range narrowed down compared to the previous session and traded within the previous day's range, making another failed attempt to surpass 50-day EMA (44,640)

The Nifty50 settled a rangebound session with minor weakness on October 12 but continued higher tops and higher bottoms formation for the third straight session holding the previous day's low at the 19,750 area, which is a positive sign.

Even if, given the formation of a Spinning Top kind of pattern on the daily charts, the index sees a correction that may be a small one with strong support at around 19,650 that coincides with the 20-day EMA (exponential moving average), but 19,800 still seems to be crucial for further market direction, experts said.

After the rally in a couple of sessions, the Nifty50 opened moderately higher at 19,823 and remained rangebound throughout the session. The index closed 17 points lower at 19,794.

A 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. Generally, it gives some reversal to the ongoing trend.

"A small negative candle was formed on the daily chart with minor upper and lower shadow. Technically, this pattern indicates a type of Spinning top formation after a small rise. But, the candle is placed beside the bullish candle of the previous session. The market action signals chances of minor short-term weakness in the coming sessions," Nagaraj Shetti, technical research analyst at HDFC Securities said.

Also read: Gainers and Losers: 10 stocks that moved the most on October 12

He feels a further weakness from here is likely to end up with a new higher bottom formation around the support of 19,650 levels.

"The overall chart pattern indicates buy on dip opportunity for the short term. A decisive move above the hurdle of 19,850 levels could open the next round of sharp upside momentum for the market ahead," Nagaraj said.

The weekly Options data suggest that 19,800 is expected to be a key area for the further decisive direction on either side of the market.

The maximum Call open interest was seen at 19,800 strike followed by 19,900 and 20,000 strikes with Call writing at 19,800 strike and then at 20,200 and 20,800 strikes, while the maximum Put open interest was at 19,800 strike followed by 19,700 and 19,600 strikes with Put writing at 19,800 strike and then at 19,700 strike.

Also read: Infosys reports 3% YoY rise in net profit at Rs 6,212 cr in Q2FY24

The further fall in volatility to around 10.6 levels may be a sign of some stability in the market at these levels and major correction seems unlikely, experts said. The fear index, India VIX, dropped for the third straight session, down by 3.34 percent from 10.99 to 10.62 levels.

Bank Nifty

Bank Nifty's trading range narrowed down compared to the previous session and traded within the previous day's range, making another failed attempt to surpass 50-day EMA (44,640). The index formed a small-bodied bullish candlestick pattern with a long upper shadow and minor lower shadow on the daily scale and closed 82 points higher at 44,599.

"The overall market sentiment remains bullish, and any dips should be considered as opportunities to initiate fresh long positions," Kunal Shah, senior technical & derivative analyst at LKP Securities said.

He feels the target is 45,000 where the highest open interest exists on the Call side. A break above 44,700 is expected to accelerate upward momentum, driven by fresh short-covering activities, he said.

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