Technical View: Nifty forms bullish candle for fourth day, looking at record highs

The Nifty50 gained for the fifth consecutive session on November 6 as the bulls retained control of Dalal Street for the entire week, with the momentum taking the index near a record high.

Improving economic activity, positive global cues, rising hope for more measures from the Federal Reserve and consistent FII flow lifted sentiment. Buying in banking & financial services and Reliance Industries pushed the index above 12,250 levels.

The index registered its highest daily close since January 17, 2020 and formed a strong bullish candle on the daily charts as the closing was higher than opening levels. The index also formed a bullish candle on the weekly scale as it rallied 5.3 percent for the week.

It is 1.3 percent away from its record high levels. Given that the index is at overbought levels, profit-booking is in the coming session but if the momentum sustains, then a high is possible next week, experts said.

For the time, traders not to chase the rally further but give priority to booking profits at around 12,350, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

The Nifty50 started off higher at 12,156.65 and gained further to hit an intraday high of 12,280.40. The index closed at 12,263.50, up 143.20 points or 1.18 percent.

"The bulls continued their march ahead as the Nifty50 registered yet another positive close for the fifth session in a row, which resulted in a strong bullish candle with intra-week range of 707 points on weekly charts. Hence, it may remain a symbolic gesture on their part to retest life-time high present around 12,430 levels, in next one or two trading sessions," Mohammad said.

However, some of the momentum oscillators, on the short-term charts, reached extremely overbought zones and an upward momentum may not be sustained, he said.

Nevertheless, in the absence of sell signals, as of now, it would be prudent to ride the rally till some weakness emerges, he said.

In the next session, on the downside, 12,131 can be considered a critical support as the breach on a closing basis may induce more selling pressure but weakness towards 12,050 can be an opportunity to create fresh longs, he added.

The volatility measured by India VIX fell further by 2.21 percent from 20.96 to 20.49 levels. The falling volatility gives stability to the bulls in the market to ride the move towards all-time high territory, Chandan Taparia of Motilal Oswal feels.

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 12,700 and 12,800 strike while Put writing was seen at 12,000 then 12,200 strike.

The option data indicated that the Nifty could trade in a wider range of 11,800-12,500 in the coming days.

The Bank Nifty also witnessed buying interest that pushed it towards 26,853.45, an intraday high. It remained consolidative during the second half of the day but positive momentum is intact with the emergence of buying interest on any small decline.

The index outperformed Nifty50, rising 485.90 points or 1.85 percent to 26,799 and formed a strong bullish candle on the weekly and daily scale. It gained 12 percent during the week.

"It has been making higher highs-higher lows for the last five trading sessions and supports are gradually shifting higher. Now it has to continue to hold above 26,350 to witness an upmove towards 27,250 and 27,500 zones while immediate key support is seen at 26,000 then 25,750 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Positive setup was seen in Motherson Sumi, Apollo Tyres, Shriram Transport Finance, IndusInd Bank, HDFC Bank, Kotak Mahindra Bank, Escorts, Mcdowell, SRF, Tech Mahindra and Marico while weakness was seen in Container Corporation, Lupin and Dr Reddy's Labs, he added.