Technical View | Nifty forms bullish candle, decisive move above 17,200 can pave way for further rally

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The Nifty50 expectedly bounced back and recouped all its previous day's losses on March 21, but still traded in a range below 17,200 which may be the next crucial resistance area. The recovery in global counterparts and rally in banking and financial services supported the market recovery.

The index opened higher at 17,060 and remained in an uptrend amid volatility throughout the session, to hit an intraday high of 17,128. It closed at 17,108, up 119 points and formed a decent bullish candlestick pattern on the daily charts, after the formation of a Hammer in the previous session.

The next resistance is expected to be in the 17,200-17,250 area, followed by 17,450-17,500 levels, whereas the supports are placed at 16,950-16,800 levels. If the index extends the uptrend further then there can be confirmation that it has formed a bottom around 16,828, the low of March 20, experts said.

"The Nifty has been consolidating for the past few days, indicating indecisiveness. The trend remained negative for the short term as the index has been sustaining below the critical moving average on the daily chart. The RSI (relative strength index) on the daily chart has narrowed down its bearish crossover," Rupak De, Senior Technical Analyst at LKP Securities said.

He feels the trend is likely to remain sideways as long as it remains within the bands of 16,950-17,200.

"A decisive move above 17,200 may induce a rally towards 17,450-17,500, while a decisive fall below 16,950 may trigger a steeper correction in the market," the expert said.

On the weekly Option front, we have seen the maximum Call open interest at 17,800 strike, followed by 17,200 strike and 17,500 strike, with Call writing at 17,800 strike, and then 17,600 and 17,400 strikes, whereas the maximum Put open interest was seen at 17,000 strike, followed by 16,900 strike, with Put writing at 17,000 strike, then 17,100 strike.

"The highest open interest continues to remain at the 17,000 level on the Put side both for the weekly and monthly expiries. The sell-on-rally texture of the market will not be negated till a bullish close happens above the 17,550 mark," Rahul Ghose, Founder & CEO at Hedged said.

Another point to keep in mind is that any aggressive shorts are to be initiated only below the 16,720 level on the index, he added.

The Bank Nifty also started off the day higher at 39,600 and sustained the northward journey till the end. The index rose 533 points or 1.35 percent to 39,895 and formed a bullish candlestick pattern on the daily charts, making higher high higher low formation with slightly above average volumes.

The banking index decisively closed above the 200-day SMA (simple moving average - 39,672), which is a positive sign. If the index sustains above the same then 40,000-40,500 is expected to be the next resistance area, with support at 38,950 levels, experts said.

The volatility cooled down to around 15 levels, making the bulls comfortable today. India VIX, which measures the expected volatility in the market, fell by 5.77 percent to 15.08 levels, down from 16.01 levels.

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