Nifty clocked strong gains on May 20 supported by across-the-board buying as the risk appetite of investors improved after China cut a key lending rate to support its economy.
Nifty opened at 16,043.80 against the previous close of 15,809.40 and touched intraday high and low of 16,283.05 and 16,003.85 respectively, before ending 457 points, or 2.89 percent, higher at 16,266.15.
All sectoral indices ended in the green with media, metal and realty indices jumping over 4 percent each. Nifty Bank index rose 2.88 percent.
"As equity investors brace for higher volatility on the back of the flip-flop in benchmark indices, the fact that markets are never priced to ground realities, the art of capitalising on the disconnect between earnings and stock prices creates pockets of opportunities," S Ranganathan, Head of Research at LKP securities underscored.
Nifty formed an open bullish 'Marabozu' pattern on the daily timeframe chart which indicates upside movement momentum for an upcoming session, said Palak Kothari, a research associate at Choice Broking.
Marabozu is the name of a Japanese candlesticks formation used in technical analysis to indicate a stock has traded strongly in one direction throughout the session and closed at its high or low price of the day.
Moreover, the index had been trading in a range of 15,750-16,410 throughout the week so a breach of either side can direct further direction.
"Nifty has given closing above the nine-day moving average which indicates a bounceback from lower levels. However, the momentum indicators MACD & 'Stochastic' were trading with a positive crossover and reversed from the oversold zone on an hourly chart which suggests a northward journey in the counter. The Nifty may find strong support at around 16,000, while on the upside 16,410 may act as an immediate hurdle," said Kothari.
Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in pointed out that with this recovery, the index also bridged the bearish gap registered in the last session, present between 15984 and 16211.
"Friday’s strong move can also be interpreted to conclude that the fall of Thursday’s session was just a reaction to the negative global cues, as the Nifty witnesses, a follow-through buying in the next trading session. In that scenario, the initial hurdle shall be around 16,400 and beyond that, the test of 20-day simple moving average (SMA) cannot be ruled out," said Mohammad.
"On the downsides, it remains critical for the index to sustain above 16,000, below which weakness can be expected with initial targets of 15,775. Considering the erratic moves of the last couple of trading sessions, it looks prudent to remain neutral on the index trade," said Mohammad.
Rupak De, Senior Technical Analyst at LKP Securities highlighted that on the daily chart, the index has formed a double bottom. Immediate resistance is visible at 16,400; a decisive breakout above 16,400 may induce a rally towards 16,600-16,700. On the lower end, support is visible at 16,000, said De.
Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.