Technical View: Nifty forms bullish candle; record high possible if index holds 12,000

The Nifty50 staged great performance in the opening itself by registering a fresh and strong breakout above 12,000 and closed the session with over 200 points gain on November 5, following positive global trend amid expectations of Democratic party winning election in the United States and more supportive measures from the Federal Reserve.

The index closed above 12,100 mark and formed bullish candle on the daily chart for the third consecutive session, as closing was higher than opening levels.

If the momentum continues and the index consistently holds 12,000 mark then there could a march towards previous record high levels, experts feel.

Considering almost 600-point rally of last 5 trading sessions, profit booking can't be ruled out in next session, said Mazhar Mohammad of Chartviewindia.in who advised traders to create fresh long positions on dip towards 12,070 levels with a stop below 11,900 on closing basis and look for targets of 12,400 levels.

The Nifty50 started off day at 12,062.40 and extended gains to hit an intraday high of 12,131.10. The index settled at 12,120.30, the highest closing level since February 19 this year, up 211.80 points or 1.78 percent.

"Nifty50 appears to have registered a breakout on the back of strong positive global news flows as it witnessed a sustained buying after registering a huge gap up. Last 4 days of price action appears to have decisively catapulted the trend in favour of bulls as it erased the pain witnessed during the corrective and consolidation phase of 11 sessions in the zone of 12,025 – 11,535 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

Hence, he feels as long as Nifty50 sustains above today's bullish gap zone of 12,027 – 11,929 levels, one can retain positive stance and look for retest of life time highs present around 12,430 levels.

However, for any reason if Nifty closes below 11,900 levels then the current bullish momentum shall fade away, according to him.

The volatility has significantly cooled down which gives stability to the bulls in the market. India VIX fell by 9.63 percent from 23.20 to 20.96 levels.

The option data points indicated that the Nifty could see a wider trading range of 11,700 to 12,200-12,400 levels.

On option front, maximum Put open interest was seen at 11,500 followed by 11,000 strike while maximum Call open interest was seen at 12,000 followed by 12,500 strike. Marginal Call writing was seen in 12,400 and 12,700 strike while Put writing was seen at 12,000 then 11,500 strike.

Bank Nifty opened gap up at 26,174.80 and continued its northward journey towards 26,375, an intraday high. It has been making higher highs- higher lows from last four trading sessions and supports are gradually shifting higher.

The index closed 541.50 points or 2.10 percent higher at 26,313.10 and formed a bullish candle with a lower shadow which indicates that declines are being bought and momentum could continue, experts feel.

"Bank Nifty has to continue to hold above 26,000 to witness an upmove towards 26,500 then 26,800-27,000 while immediate key support is seen at 25,750 then 25,500," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.