Technical View: Nifty forms bullish candle; 10,900 key level for further sharp upside

Bulls were back in action on July 9 after taking a day's breather following a five-day run-up. The Nifty50 continued to trade in a positive terrain throughout the session and closed at more than a four-month high, backed by positive Asian cues, and rally in banking & financials and metals.

The index recouped all its previous day's losses and closed above 10,800-mark, forming bullish candle on the daily charts as closing was higher than opening levels.

Experts feel the Nifty has to decisively cross 10,900 levels for strong upside, or the current rangebound trend may continue in the near term.

For time being, Mazhar Mohammad of Chartviewindia.in advised traders to remain neutral as it looks prudent to initiate a trade only when Nifty emerges out of its 4-day trading range present between 10,885 – 10,690 levels.

The falling volatility continued to support bulls as India VIX fell by 4.55 percent to 24.91 levels.

The Nifty50 opened higher at 10,755.55 and gradually extended uptrend to hit a day's high of 10,836.85. The index closed with 107.70 points or 1.01 percent gains at 10,813.50, the highest level since March 5, 2020.

"Nifty50 added one more listless trading session with an extremely narrow range of trading confining itself to 103 points making it the lowest intraday trading range in the last 4 sessions. This kind of directionless moves with narrow ranges may be hinting that Nifty is awaiting a breakout in either of the directions and such a breakout shall eventually lead to a bigger directional move based on the direction of the breakout," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in told Moneycontrol.

While on the upside 200-day simple moving average, placed at 10,884, seems to be the big impediment, on the downside 10,690 seems to be the immediate support, he feels.

According to him, if Nifty decisively closes above 10,900 levels then Nifty shall swiftly move into the bearish gap zone of 11,035 – 11,244 levels registered on March 6. "However, if it closes below 11,690 then it will initially fall towards 10,500 levels."

With today's action, the options data indicated the trading range for Nifty has been shifted higher to 10,500 on the lower band and 11,200 on the upper band.

On option front, maximum Put open interest was seen at 10,000 followed by 9,000 strike, while maximum Call open interest was at 11,500 followed by 11,000 strike. Call writing was seen in 11,500, then 11,400 strike while Put writing was seen at 10,600 then 10,400 strike.

The Bank Nifty opened positive at 22,753.15 and after an early consolidation, headed towards 23,000-mark in the last hour of the session. The index closed at 22,907.20, up 322.55 points or 1.43 percent and formed a bullish candle on the daily charts.

"It has given the highest daily close in the last 77 trading sessions and has been making higher top - higher bottom formation. Now it has to continue to hold above 22,500 levels to witness an up move towards 23,500 levels while on the downside key support exists at 22,300 then 22,000 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.