Technical View: Nifty forms strong bullish candle on weekly scale, MACD gives a buy signal

After a volatile start to the trading, the Nifty50 gained momentum in the afternoon and decisively surpassed the crucial 9,500-mark on May 29 despite negative global cues amid US-China tensions.

The buying in banking & financials, auto, FMCG and metals stocks helped the index close higher for the third consecutive session and formed a bullish candle on daily charts, as closing levels were higher than the opening.

The Nifty snapped a three-week losing streak to close 6 percent higher for the week and formed a strong bullish candle on the weekly scale.

One interesting thing that was visible on the charts was a buy signal triggered by the MACD indicator on the daily charts. But experts see some profit-booking in the coming session, as the index has rallied 551 points in three straight sessions.

The Moving Average Convergence/Divergence indicator or MACD is a refinement of the two moving averages systems and measures the distance between the two moving average lines.

The Nifty opened lower at 9,422.20 and turned volatile to hit the day's low of 9,376.90, but gained momentum in the afternoon to touch the day’s high of 9,598.85. It closed at 9,580.30, the highest closing level of May, up 90.20 points or 0.95 percent.

"The bulls appears to be strengthening their grip on the markets as the Nifty50 decisively closed above its near-term hurdle of 55-day EMA (which was placed at 9,518) with a solid bullish candle on weekly charts. Moreover, daily MACD has generated a fresh buy signal post today's price action. Hence, sustaining above 9,400 levels, the Nifty can initially head to test recent highs of 9,889 levels," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said.

But considering the 600-point gain in the last three sessions, some profit booking from current levels can't be ruled out in next session, he said. The fall can be seen as an opportunity to create fresh long positions.

According to Mohammad, on the downside, initial support can be expected at around 9,376 and a breach can lead to further consolidation in the 9,300 – 9,100 zone.

He advised traders to go for fresh buying on a dip close to 9,400 levels with a stop below 9,370 on a closing basis.

Sumeet Bagadia, Executive Director, Choice Broking, said the way Nifty was trading above its 21-day moving average for the last three days, it indicated a positive momentum.

"As of now, the index has a resistance at 9,600, if the index gives a close above this level, then we may see a good spurt up to the 9,730-9,890 level, while downside support comes at 9,400," he said.

The Bank Nifty also witnessed volatility after opening at 18,962 but gained momentum in the last couple of hours of trade to hit an intraday high of 19,358.05 to settle above the 19,000-mark.

The index closed at 19,297.30, up 127.50 points, or 0.67 percent, and formed bullish candle on the daily charts.

The Bank Nifty gained in all trading sessions of the truncated week, rising 11.7 percent and formed a strong bullish candle on the weekly scale.