Technical View: Nifty forms bullish candle, ends above 10,600; likely to march towards 10,700

The market managed to end rangebound session higher on Thursday with the Nifty decisively holding 10,600 levels on closing basis and formed small bullish candle on the daily charts.

Banking & financials, auto and metals stocks led the market upside. The broader markets also participated in the upmove with Nifty Midcap index rising half a percent.

The index failed to surpass previous day highs (10,651) and consolidated for most part of the trading session, but closing above 10,600 indicated that it could rally further in coming session, experts said.

The Nifty50 after opening flat gained momentum to surpass 10,600 in morning itself followed by small correction to hit day's low off 10,557.50. The index gradually gained strength again in late morning deals and touched a day's high of 10,646.50 in afternoon. It closed 40.40 points higher at 10,616.70.

"Nifty50 continued to trade with one more listless session as it remained in a 80-point narrow range before signing off the day with a small bullish candle," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

He said the key take away from Thursday's session can be a closure of Nifty50 above psychologically important resistance level 10,600 for the first time in this entire consolidation phase. "Hence, a follow through buying in next session can result in a much awaited breakout above 10,650 levels."

In such a scenario initial hurdle of 10,710 may not be that difficult to clear for bulls, so the projected target can be easily in the zone of 10,754–10,840 levels, he feels.

Mazhar said contrary if Nifty slips below 10,530 levels then it can again retest the lows of 10,440. "For time being traders should aim at buying breakout above 10,650 levels for a initial target of close to 10,800 levels."

India VIX fell 1.47 percent to 18.55 levels. However VIX has to cool down below 16 zones to get the next leg of smooth upside rally in the market.

On option front, maximum Put open interest (OI) was at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 11,000 followed by 10,800 strike. Put writing was seen at 10,400 and 10,600 strike while minor Call writing was seen at 10,700 and 10,800 strike. Option band signifies an immediate trading range in between 10,450 to 10,700 zones.

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