a laptop computer sitting on top of a desk: Technical View: Nifty forms bullish candle but profit-booking can't be ruled out

© Sunil Matkar
Technical View: Nifty forms bullish candle but profit-booking can’t be ruled out

The Nifty50 remained strong throughout the session and closed above 11,400 levels on September 10, backed by index heavyweight Reliance Industries closed at a record high. Select banking and financials, auto, FMCG and IT stocks also supported the market.

The index started off the day at 11,363.30 and rose to 11,464.05 during the day. The index closed at 11,449.30, up 171.30 points or 1.52 percent.

The index formed a bullish candle on daily charts as closing was higher than the opening level, indicating positive sentiment.

On September 10, around 106 points were contributed by the unusual move witnessed in Reliance Industries, which rose more than 7 percent.

Hence, in the next trading session, the chances of Nifty50 undergoing some profit booking in the nearby resistance zone of 11,450 – 11,507 levels can’t be ruled out, Mazhar Mohammad, Chief Strategist–Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

Traders should remain neutral on the index by focusing on stock-specific opportunities, he said.

The strong pull-back attempt by the bulls as a follow-through to the previous day’s late recovery was hinting that the Nifty50 could be heading into a consolidation phase with a near-term bottom in place around the recent low of 11,185, he said.

“As long as it sustains above the level of 11,278 on a closing price basis, a sideways consolidation in the zone of 11,280 – 11,550 can be expected,” Mohammad said.

If the Nifty registers a close below 11,278, then that may again facilitate a fresh bout of selling pressure in the index, Mohammad said.

India VIX fell by 4.35 percent from 22.23 to 21.26 levels, which also supported the bulls.

VIX has fallen to its lowest closing level of the week but needs to cool down below 20-18 zones to for the next leg of the rally, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

The options data indicated that the Nifty could move in a wider trading range of 11,200 to 11,700, which shifted higher from 11,100-11,500.

On the options front, maximum Put open interest was seen at 11,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was at 11,700 then 12,000 strike while Put writing was seen at 11,300 then 10,600 strike.

The Bank Nifty underperformed the Nifty but managed to hold above its 50-DEMA placed at 22,393, with the intraday gains of around 1 percent.

The index settled at 22,466.20, up 199.20 points and formed a high wave Doji candle as it closed near its opening levels even after swinging violently between 22,222 and 22,650.

“It negated the formation of lower highs – lower lows on the daily scale after four trading sessions but the absence of follow was clearly seen in banking counter,” Taparia said.

The index needs to hold above 22,500 to witness some stability and a move towards 22,750 and 23,200 zones. However, a hold below 22,222 could drag the rate-sensitive index towards 21,750

Positive setup was seen in Reliance Industries, BPCL, Asian Paints, ACC, Grasim Industries, Berger Paints, Cummins India, Tata Consumer, Pidilite Industries and Hero MotoCorp while a weak structure was seen in Shriram Transport Finance, Coal India, Kotak Mahindra Bank, Gail, etc, he added.

Disclosure: Reliance Industries Ltd is the sole beneficiary of Independent Media Trust that controls Network18 Media & Investments Ltd which publishes Moneycontrol.