Technical View - August 5, 2020 - Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
After showing sharp upmove on Tuesday, Nifty witnessed high volatility today and closed the day on a slightly positive note. A small negative candle was formed with minor upper and lower shadow, which indicates high volatility in the market. This action in the market was mainly ahead of RBI policy announcement, which is expected on Thursday.
Today's high volatility in the market has not damaged the positive sentiment created on Wednesday, as the short term trend remains up and a sustainable move above 11200-225 levels could open next upside levels of 11350.
The positive chart pattern of higher highs and lows continued in the market and the last sessions swing low of 10882 could be considered as a higher bottom of the sequence. As per this pattern, one may expect Nifty to move up and retest the swing high of 11340 levels in the near term. Daily 14 period RSI is placed at the edge of 60. Its sustainable move above 60 could mean more upside for the market ahead.
The short term trend of Nifty continues to be positive. The volatility is expected to continue for the next session (RBI's policy announcement). The outcome of this event is likely to ignite sharp intraday movement on either side. One may hold long positions with the stoploss of 10900 levels and a sustainable move above 11200-11225 levels is expected to pull Nifty towards 11350 in the near term.