Recovery results into Island reversal pattern, expect rally to extend: Angel Broking
Daily Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):
"Yesterday's tail end recovery was very crucial for our markets. We managed to defend key levels in the process which was followed by a massive bump up at the opening. We shaved off some portion of early gains in first couple of hours; but once again strong buying emerged at lower levels which accelerated towards the closing point of the day. Due to this smart recovery, we eventually managed to reclaim the 12100 mark convincingly by adding more than a percent to the bulls' kitty.
As per technical observations, yesterday all major indices formed a 'Bullish Hammer' pattern on daily chart and for Nifty it was placed at the 50% retracement of the recent up move. Now we have moved one step forward as we can see the yesterday's 'Hammer' pattern along with Monday's and Today's candle, combinedly gives a birth to a 'Bullish Island Reversal' pattern. This configuration occurs when the previous gap is precisely filled by yet another gap but in the opposite direction and has extremely bullish implication. Hence, going forward, as long as we do not enter into today's gap area of 12042.10 - 12030.75, the said pattern remains intact and is likely to provide some impetus to the next leg of the rally. In the forthcoming session, once Nifty surpasses 12160, we may see Nifty retesting of 12220 - 12250 levels. On the downside, the immediate support is at 12086 - 12042.
We continue with our positive stance and advise traders not to create contradictory bets against the major direction. The Midcap index too has a similar structure and hence, we are likely to witness the similar buzz in the broader market as we were seeing in the previous weeks."