NEW DELHI: After the last two sessions of sharp sell-off, the bulls finally managed to stage a comeback on Tuesday as the Nifty50 index almost recouped all losses sustained in the last session.
The index opened with gains at 17,044.10 and extended the lead to as high as 17,210.65 before a minor sell-off began. Eventually, it settled at 17,156.10, up 244 points against its previous close.
“Structurally, the swings in both the directions over the last few sessions are part of a base formation process. In terms of the price pattern, the index has the potential to form a base triangle. This means that the sideways action can continue further before the index prepares for a larger up move,” said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas.
As the market rallied during the day, the call writers looked to cover their positions, while fresh writing was seen in 18,000 puts, analysts noted. This indicates that for the next couple of sessions, 17,000 will now be seen as immediate support while 17,300-17,400 will be seen as immediate resistances, they added.
“Price action of the last couple of trading sessions is hinting that the Nifty might have entered a high volatility phase where a big single-day directional move failed to attract follow-through action,” said Mazhar Mohammad, Chief Strategist – Technical Research, Chartviewindia.in.
“Hence, despite the Nifty closing strongly above its 100-day moving average, it may not be significant enough as price action is crisscrossing the said average. Usually, this kind of high movements are found when the index is making a triangular formation with lower tops but higher bottoms.”
In such a scenario, the index should not cross 17,490 on the higher side, and at the same time, it should not breach 16,890 on the lower end. Hence, the index may be in for consolidation for the next couple of sessions before witnessing a sustainable directional move, said Mohammad.
“Till then, traders can shift their focus towards stock-specific opportunities,” he added.
With the significant up move, India VIX, indicative of fear and volatility in the market, also eased nearly 7 per cent to slip below 19-level.
Among sectors, metals led the rally today, but superstars were banking names that have gone through underperformance for a while now. In line with global positive cues, the Bank Nifty opened positive and hence, the short sellers were forced to cover up their positions which added fuel to the intraday up move. The banking index particularly outperformed the benchmark as the private sector heavyweights witnessed good buying interest.
“The Bank Nifty index has formed a higher low from its 200-day moving average. The momentum could lead the index towards its 20-EMA, which is around 37,150, while 36,350 and 36,200 will be the immediate supports,” said Ruchit Jain, Trading Strategist at 5paisa.com.