Tech View: Nifty forms small bodied bullish candle; what should traders do on Wednesday?


The Indian markets shrugged off concerns around a potential rate hike by the US Federal Reserve meeting in its 2-day meeting starting today to close with gains of about 1 per cent.

The Nifty50 rallied 194 points to close above crucial resistance of 17,800, while the S&P BSE Sensex rose nearly 600 points.

The Nifty reclaimed 17,900 in intraday trade on Tuesday but failed to hold on to the momentum and closed just above 17,800, which resulted in a small-bodied candle on the daily charts.

Experts advise caution ahead of the Fed’s 2-day meeting starting today. The Street is expecting a rate hike of about 75 bps, but a jumbo 100 bps hike or a hawkish stance could lead to a knee-jerk reaction, they say.

“We believe all eyes will be on the FOMC meeting scheduled tomorrow wherein there are high expectations of the Fed increasing the rates by 75 bps,” Ajit Mishra, VP – Research,

Broking, said.

The Fed rate decision will dictate the market trend going ahead. The Nifty50 opened positive and then extended its move towards 17,919 levels.

It witnessed some profit-booking decline from higher levels in the last hour of the session but managed to close above 17,800. On the downside, crucial support is placed at 17,400, while on the upside, 18,000-18,100 will act as resistance.

“It formed a small-bodied bullish candle with a long upper shadow on the daily scale, indicating buying interest from lows, but an absence of follow-up activity is seen at higher zones. The index witnessed a good recovery of around 500 points in the last two sessions from 17,429 to 17,919 levels,” said

Chandan

, Derivative & Technical Analyst, Fin Services.

“Nifty has to hold above 17,777 zones, for an up move towards 18,000 and 18,088, whereas support exists at 17,667 and 17550,” he said.

India’s VIX fell by 5.73 per cent from 19.94 to 18.79 levels. Volatility cooled off which paved the way for the bulls.

On the options front, the maximum Call OI is at 18,000, which is likely to act as stiff resistance, followed by 18,500 strikes.

The maximum Put OI is placed at 17,500 and is likely to act as crucial support, followed by 17,000 strikes.

“Option data suggests a broader trading range in between 17,200 to 18,200 zones, while an immediate range in between 17,500 to 18,000 zones,” added Taparia.

Adopt buy on dips approach:
The likelihood of markets turning volatile ahead of the US Fed decision is very strong; hence, experts advise traders/investors to remain stock-specific.

A large part of the decline is more of a knee-jerk reaction; hence, it makes sense for investors to buy the dip, suggest experts.

“The weakness of western markets did not affect the buoyant domestic market. The Indian market is not seemingly apprehensive of Fed policy. Buying on dips is the strategy being reinforced here,” Vinod Nair, Head of Research at

, said.

“Even the lagging IT and pharma stocks joined the rally, slowly emerging as a value pick for long-term investors. However, to sustain the trend, the global market needs to stabilise,” he said.

“It makes sense to be stocks & sector specific in this unfavourable global economic scenario & highly premium valuation of India compared to the rest of the world,” recommends Nair.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



Source link

Leave a Reply

Your email address will not be published.