Technical View | Nifty forms bullish candle; 17,000 to remain crucial support level

The Nifty50 made a smart recovery from lows around 17,000 in the afternoon and gained more than one percent on March 22, tracking a positive global trend. The index also recouped the previous day’s losses as buying was seen in banks, auto, IT and select metal stocks.

The index closed higher than opening levels and hence formed a bullish candle on the daily charts. If it closes decisively above 17,350 levels in the coming session, then 17,900 could be the next hurdle for the index, experts feel.

The volatility cooled down and gave comfort to bulls, but remained way above 20 levels, indicating that the volatile swings may continue in the markets ahead. India VIX, the fear index, closed at 24.07, down 2.2 percent.

The Nifty50 opened flat at 17,120 and corrected up to 17,006 amid volatility in the morning trade, but showed smart recovery in the afternoon and climbed up to 17,334 intraday. The index closed near its day’s high, up 198 points or 1.2 percent at 17,315.50.

“Bulls made a smart recovery from the intraday lows of 17,000 levels by respecting the strong near term support levels. Post this price behaviour it can be easy for the bulls to get past the hurdle present around 17,350 levels in the next trading session,” says Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.

He feels that if the Nifty50 closes above 17,350, then eventually it can expand its strength towards 17,900 levels.

Also read – Gainers & Losers: Five stocks that moved the most on March 22

However, in Tuesday’s session, the advance-decline ratio slightly favoured bears. Hence, “the inability of bulls to get past 17,350 should result in sideways consolidation between 17,350 – 17,000 levels,” says Mohammad.

On the downside, a 200-day moving average, present around 17,000 levels, shall continue to remain as critical support, says Mazhar who advised short term traders to buy either above 17,360 or on a dip.

Option data also indicated that 17,000 could be crucial support for the Nifty and hence, pointed towards the trading range for the index at 17,000-17,700 levels for coming sessions.

On the option front, maximum Call open interest was seen at 18,000 strike followed by 17,800 strike while maximum Put open interest was seen at 16,300 strike followed by 16,000 strike. Call writing was seen at 17,800 strike then 17,400 strike while there was Put writing at 17,000 strike then 16,900 strike.

Also read – Market rebounds 1% after opening lower. Factors behind the turnaround

Bank Nifty also opened flattish at 35,976 and fell below 35,400 levels, but witnessed a sharp recovery thereafter. Heavyweight banking stocks picked up strength and the index closed with gains of 330 points at 36,349.

The index formed a bullish candle which resembles a Bullish Hammer kind of pattern formation on the daily scale with a long lower shadow indicating buying was visible at declines. “Now it has to hold above 36,250 levels to march towards 36,600 and 37,000 levels, whereas support can be seen at 36,000 and 35,750 levels,” says Chandan Taparia, Vice President, Analyst-Derivatives at Motilal Oswal Financial Services.

But the broader markets underperformed frontline indices, hence the market breadth was in favour of bears. The Nifty Midcap 100 and Smallcap 100 indices gained 0.28 percent each, while 1,045 shares declined against declining 879 shares on the NSE.

Chandan Taparia says a positive setup was seen in Tech Mahindra, Reliance Industries, Tata Motors, BPCL, JSW Steel, TCS, ITC, Kotak Mahindra Bank, Bajaj Finance and Infosys while weakness was seen in HUL, Britannia and Cipla.

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