Mr. Nagaraj Shetti, Technical Research Analyst, HDFC Securities
After showing continuous weakness in the last 7 sessions, Nifty witnessed an excellent comeback on Friday and closed the day with sharp gains of around 276 points. After opening with a negative note, the market showed range movement with weak bias till the outcome of RBI's mid quarter policy meet at 10 am. Post announcement of rate hike by RBI, the market has started to scale up steadily in the early mid part of the session and the upside momentum continued till the end. Minor consolidation has occurred towards the end.
A long bull candle was formed on the daily chart, which indicates a formation bullish engulfing pattern. Formation of such pattern after a decent weakness from the highs of 18K mark signal a possibility of an important bottom reversal for Nifty around 16800 levels.
Nifty on the weekly chart formed a small negative candle with long lower shadow. Technically, this pattern signal the formation of bullish hammer type candle pattern at the lows. Hence, such weekly chart pattern after a reasonable decline calls for bottom reversal for the market. We observe a broadening type pattern, which is unfolding in Nifty as per weekly timeframe chart. As per this pattern, the upper trajectory comes around 18100 levels, post confirmation of this pattern.
Conclusion: The short term trend of Nifty has turned into positive. The placement of important support and the overall chart pattern of daily and weekly signal a crucial bottom reversal at 16747 levels. One may expect follow-through upmove in coming week. The next overhead resistances to be watched around 17200-17300 levels for the next week. A sustainable move above this hurdle is likely to open doors for 18100 mark in the near term.