Tech View: Nifty pullback rally may continue. What traders should do next week

NEW DELHI: While recouping most of Thursday’s loss, Nifty on Friday ended 190 points higher to form a long bull candle on the daily chart.

The short-term trend of Nifty seems to have reversed on the upside and the sustainability of this upside bounce could be crucial to call this an important bottom reversal. Nifty is likely to move up further towards the next overhead resistance of around 19,230 levels. Any weakness from here could find support around 18,850 levels, said Nagaraj Shetti of HDFC Securities.

The maximum call open interest strike of 19,000 saw call writers exiting and put writers strengthening their positions, which is a bullish sign.

What should traders do? Here’s what analysts said:
Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas
We expect this pullback to continue till 19,160 – 19,220, where resistance in the form of a Fibonacci retracement level and the 40-hour moving average is placed. The hourly momentum indicator has a positive crossover which is a buy signal. Thus, considering the above parameters we expect the pullback to continue. On the weekly charts, we can observe that the Nifty has respected the support zone of 18,800 – 18,925 where multiple support parameters in the form of the 40-week average and a crucial Fibonacci retracement level were placed. Thus, going ahead the Nifty can consolidate within 18,800 – 19,200 before resuming the next leg of the fall. In terms of levels, 19,160 – 19,220 shall act as resistance, while 18,930 – 18,900 shall act as an immediate support zone.

Rupak De, LKP Securities

After relentless selling in recent days, Nifty has temporarily paused its decline due to an oversold chart setup. However, the index closed significantly below the critical breakdown level of 19,250. As long as it stays below 19,250, the market may continue to be inclined towards selling on any upward movements. On the downside, a resumption of weakness is expected if the index falls below 18,800. This is because put writers are likely to defend Nifty with substantial positions at 18,800, with immediate support placed at 19,000.

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