Technical View - Oct 19, 2020 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
After showing a sustainable upside bounce on Friday, Nifty continued with follow-through upmove on Monday and closed the day on a decent gains of 110 points. A small body of negative candle was formed with gap up opening with long lower shadow and the opening upside gap remains unfilled. Technically, this pattern indicate a continuation of upside bounce in the market amidst a range movement.
The overall market breadth has started to improve and the broad market indices like mid and small cap segments have ended with the gains of 0.77% and 0.73% respectively. This is positive signal and suggest more upside for the broader and for the benchmark index.
After the formation of bearish engulfing pattern on Thursday, Nifty continued with upside bounce for the second consecutive session on Monday and closed higher. This could raise doubt over the negative pattern implication of bearish pattern. As long as the upside of 12025 is protected, one can't rule out any profit booking from the highs in the short term. A sustainable move above 12025 could be considered as a negation of bearish engulfing pattern.
Similar upside bounce has occurred after the formation of bearish engulfing in past (31st Aug) and Nifty showed short term weakness from the highs, after three days of upside bounce. Hence, one needs to be cautious at the highs of 11950-12000 levels in the next 1-2 sessions for any profit booking emerging from the highs.
Conclusion: The short term trend of Nifty continues to be positive. There is a possibility of further 1-2 day's of upmove before showing minor downward correction from the highs. The upper 11950-12000 is going to be a overhead resistance for the short term. Immediate support is placed at 11780.