Nifty Analysis: Tech View: Nifty forms small bullish candle as consolidation continues

NEW DELHI: Nifty climbed for the 10th straight session on Wednesday. Yet, the index failed to take out the 12,000 mark for the second session in a row and negated a formation of higher lows after 12 successive sessions. Analysts said the ongoing consolidation is likely to continue for the index till it moves out of the 11,800-12,025 range.

“For the day, the index formed a small bullish candle on the daily chart with a long lower shadow, which suggests buyers became active at the support level of 11,800, which was near the previous swing high of 11,794,” said Aditya Agarwala of YES Securities. He believes the 11,800 level would now act as a crucial support for Nifty.

Check out the candlestick formations in the latest trading sessions

“The index is witnessing a consolidation over the past few sessions. The near-term oscillators are sending out mixed signals. Nifty50 has to move outside the current trading range between 11,800 and 12,025 level to trend again,” said Arun Kumar, Market Strategist at Reliance Securities.

During the session, Nifty could only go up to 11,994 level on Wednesday after hitting 11,988 in the previous session. It had hit a swing high of 12,022 on Monday. The index eventually closed Wednesday’s session at 11,971, up 36.55 points or 0.31 per cent.

Mazhar Mohammad of said Wednesday’s candle looked like a Hanging Man formation. “This kind of formation is usually seen around short-term turning points, when the momentum is getting exhausted. Interestingly, a close observation of last five sessions reveals Nifty’s movement is almost flat with narrow ranges and indecisive formations. Hence, unless the index registers a strong close above 12,022 level, further upward strength cannot be expected. A close below its five-day simple moving average of 11,916 can be considered as an initial sign of weakness, whereas a close below 11,800 can accelerate selling pressure,” he said.

Chandan Taparia of Motilal Oswal Securities said the index’s decline trigger buying, even as Nifty negated the formation of higher lows.

“Nifty has seen the highest daily close in 148 sessions since February 20. It has to hold above 11,900 level to witness a bounce towards 12,100 level. Major support exists in the 11,800-11,750 range,” he said.

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