Nifty anlaysis: Tech View: Nifty forms big bullish candle; 14,750 level crucial now for further gains

NEW DELHI: The bulls continued to build long positions, as Nifty on Tuesday tested the all-time high the index had recorded last month and in the process formed another big bullish candle. Analysts believe the 14,750 level will now be crucial in deciding which way the index moves.

The 50-pack witnessed continuation of the positive momentum and opened with a significant gap on the upside. It went on to test the all-time high of 14,753, but closed at 14,647, registering a gain of 366.65 points.

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“Once the high gets taken out, the index can head towards 15,000 level in the short term. On the downside, the gap area between 14,469 and 14,336 levels will act as a crucial support zone. The 20-DMA is also near the gap area, which will offer additional support,” said Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.

With this move, Nifty has almost wiped out all the losses sustained during the week ahead of the Union Budget, that too in just two sessions. But now some analysts suggest caution before taking any fresh positions.

Check out the candlestick formations in the latest trading sessions

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“Considering the strong upmove in last two sessions, traders are advised to avoid fresh buying in the index and preference should be given to booking profits on long positions,” said Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory, Chartviewindia.in.

He said unless Nifty gets past the 14,731 level, which is Tuesday’s intraday top, in the next trading session, one should not expect further strength. In case the said hurdle is cleared, then Nifty may register a new lifetime high. In that scenario, the rally shall eventually get extended towards the next target of 15,200,” he said.

“Contrary to this, if the bulls fail to cross the 14,731 level, then there will be a good chance of Nifty slipping into sideways consolidation. On a mild correction, buying shall emerge in today’s bullish gap zone of 14,469-14,336, whereas a close below 14,330 level can confirm short-term weakness,” said Mohammad.

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As Nifty P/E is again close to 39 level with a relatively higher volatility, the fear of another round of selloff has seeped in. From that view, the next session will be crucial, said analysts.

“We need to be defensive, as the market approaches previous highs and focus should be on pharmaceuticals and FMCG stocks,” said Shrikant Chouhan, Executive Vice President (Equity Technical Research) at Kotak Securities. He said the strategy should be to buy between 14,300 and 14,200 levels, and have a stop loss at 14,100.

Manish Hathiramani, proprietary index trader and technical analyst at Deen Dayal Investments, agreed with Chouhan and said the index has a good support at 14,100 level, and hence, one should accumulate positions closer to that level.