Technical View: Nifty forms bullish candle again, consolidation likely till index crosses 12K

The Nifty50 witnessed volatility due to a closer than expected US presidential election but turned strong in the last couple of hours of trade backed by IT and pharma stocks on November 4.

The index closed above the 11,900-mark and formed a bullish candle on the daily charts for the second consecutive session as the closing was higher than opening levels.

Experts feel the index has to cross the psychologically important 12,000-mark for a strong uptrend but till then, it is expected to remain rangebound.

Traders should create long positions if the Nifty closes above 12,000 for an initial target of 12,200, whereas shorting should be considered only on a close below 11,750 levels, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

After opening marginally lower at 11,783.35, the NIfty remained volatile and rangebound. It fell sharply in the afternoon to hit the day's low of 11,756.40 but immediately rebounded and traded higher in the last couple of hours to close 95 points up at 11,908.50.

"The trend in Nifty, as of now, seems to be sideways in the broader range of 12,000-11,500. Hence, for a sustainable upswing, it needs a fresh breakout above 12,000 levels on a closing basis," Mohammad said.

In such a scenario, the index would head towards its initial target of 12,200 and beyond that, a retest of 12,430 can't be ruled out, he said.

If the index fails to sustain above 11,750, then it will be dragged to 11,500, he said.

The Nifty made a bullish candle and formed higher lows for the last three trading sessions. Now it has to continue to hold above 11,750-11,777 to witness an upmove towards 12,020 then 12,200 while on the downside, support is seen at 11,666 then 11,550 zones.

India VIX fell further, down by 4.29 percent from 24.24 to 23.20 amid uncertainty over US election results.

On the options front, maximum Put open interest was seen at 11,000 followed by 11,500 strike while maximum Call open interest was at 12,000 followed by 12,500 strike. Marginal Call writing was seen in 12,000 and 12,500 strike while Put writing was seen at 11,900 then 11,600 strike.

The data indicates that the Nifty could see a wider trading range of 11,600 to 12,100 levels in the coming days.

The Bank Nifty opened negative at 25,539.55 but surpassed the previous day's high to touch 25,891.00 during the day only to but witness profit booking from higher zones. It closed 88.80 points higher at 25,771.60 and formed a bullish candle with a long lower shadow on the daily scale, which suggested that the bulls were dominant and declines were being bought.

"The index continues to form higher highs- higher lows from the last three sessions. Now it has to continue to hold above 25,500 to witness an upmove towards 26,000 then 26,250 while immediate key support is seen at 25,200 then 25,000," said Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.