Technical View: Nifty forms bullish candle, has to hold above 11,800 for further upside

The Nifty50 was on the up from the word go and closed higher to form a bullish candle on the daily charts on November 3. Banking & financials, auto, metals and pharma stocks lifted the index ahead of the US presidential elections.

The recovery seen in the last hour of trade on the previous day carried on and the index closed above the important 11,800-mark.

Experts said if the index sustains above 11,800 in the coming days, the possibility of crossing 12,000 again would be higher this month.

Keeping in mind the US election, traders should remain neutral in the next session and if someone is already long, then they should book profits above 11,900, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

The Nifty50 opened strong at 11,734.45 and extended gains to hit an intraday high of 11,836.20. The index finished the session at 11,813.50, up 144.30 points or 1.24 percent.

"As the index managed a decisive close above its near-term hurdle of 11,750 levels, it should ideally head towards 11,922 levels in the next session," Mohammad said.

There seems to be strong resistance around 12,000, hence unless the Nifty closes above the stiff resistance of 12,000, a sustainable upmove should not be expected, he said.

According to him, the Nifty may remain vulnerable to high volatility, along with global markets, due to US elections which can influence the near-term trend in either direction.

If the Nifty trades below 11,723 in the next session, then weakness shall be expected. If the Nifty sustains above 11,535 after the event, then one can retain a bullish stance and look to create long positions, he said.

In the F&O space, the Nifty saw an addition of fresh long positions. A decent amount of longs from the last series are also intact.

"Looking at today's move beyond the 11,800-mark, the Call writer of 11,700-11,950 lost hopes and hence they preferred covering their positions. Meanwhile, decent writing was seen in 11,500-11,800 Put options. Now, the maximum open interest concentration for the current weekly series is placed at 12,000 Call and 11,500 Put options," Sneha Seth, Derivatives Analyst at Angel Broking, said.

The volatility index plunged 4 percent, which is a sign of strength.

Considering the recent development in the derivatives segment, Seth continued with her optimistic stance and expects an extension of the recent rally beyond 12,000. Any intraday decline shall be an opportunity to re-enter, she said.

The Bank Nifty climbed above 25,000 at the opening itself to 25,108 and rallied to touch the day's high of 25,760.70. The index rose 790.30 points, or 3.17 percent, to close at 25,682.80 and outperformed the Nifty for a second consecutive session to form a bullish candle on the daily charts.

"Now the Bank Nifty has to continue to hold above 25,250 to witness an upmove towards 26,000 then 26,250 while immediate key support is seen at 25,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in ICICI Bank, HDFC, HDFC Bank, SBI, Axis Bank, Sun Pharma, Bajaj Finance and Hero MotoCorp while weakness was seen in Reliance Industries, UPL, Godrej Properties, Bata India and HCL Technologies, he added.