Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral on index and particularly they should refrain from creating short positions unless some signs of reversal are visible.
The Nifty50 started off the week strong above 10,700 mark and remained so throughout session to close nearly four-month on July 6, backed largely by positive global cues and progress in vaccine. The first sign of de-escalation of India–China border tensions could be also one reason for rally in the market.
The index continued to northward journey for fourth consecutive session and closed above 10,750 levels, forming bullish candle on the daily charts following bullish candle formation in previous week.
As the index added around 450 points in four straight sessions, traders should be cautious, though the momentum seems to remain in favour of bulls with next hurdle at 200 DMA, experts feel.
The consistent fall in volatility also favoured bulls as the India VIX declined by 2.22 percent to 25.19 levels, the lowest in last four months.
As of now, considering narrow intraday trading range, Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral on index and particularly they should refrain from creating short positions unless some signs of reversal are visible.
The Nifty50 after opening higher at 10,723.85 remained in an uptrend throughout session and hit an intraday high of 10,811.40. The index closed at 10,763.70, the highest level since March 9, up 156.30 points or 1.47 percent.
"Albeit momentum is high in favour of bulls, this market may remain vulnerable for a sudden sell off as Nifty50 is registering somewhat weak candle structures with narrow intraday trading range and indecisive formations for last three trading sessions," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.
"Though there are no apparent sell signals on charts, the current intraday narrow ranges can still be construed as weakening momentum while Nifty is heading high. While on the upsides, immediate hurdle seems to be its 200-day simple moving average whose value is placed around 10,887 levels, weakness shall get confirmed with a close below 10,695 levels," he said.
"In case if Nifty manages a strong close, with a wide intraday trading range, above 10,890 levels, the rally can get extended upto 11,240 kinds of levels," he added.
Option data indicated that the Nifty could trade in a wider range of 10,400 to 11,000 levels.
Maximum Put open interest was seen at 10,000 followed by 9,000 strike, while maximum Call open interest was at 11,500 followed by 11,000 strike. Call writing was seen in 11,300, then 10,800 strike while Put writing was seen at 10,700 then 10,600 strike.
Bank Nifty opened gap up with more than 350 points and extended it move towards 22,400 levels. It closed positive with the gains of 1.59 percent or 346.60 points at 22,199, but formed a Bearish candle on daily scale as it consolidated in range of 200 points and closed lower than its opening levels.
"It managed to close above 22,000 zone but multiple hurdles are intact at 22,400-22,500 levels. Now it has to continue to hold above 21,750 to witness an upmove towards 22,500 then 23,000 levels while on the downside, supports are seen at 21,500 then 21,250 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.