Tech view: Nifty forms green candle, eyes breakout above 23,500. How to trade tomorrow

A small green candle was formed on the daily chart with a long lower shadow. Technically, this market action could mean weakness in the market with range-bound action, which is also signaling the absence of sharp downside momentum from the swing highs. Previous bearish patterns like lower tops and bottoms are in the process of reversal. After surpassing the last lower top at 23,426 levels recently, Nifty is presently in the process of a new higher bottom formation in the short term.

The near-term uptrend of the Nifty remains intact. The present weakness could end up soon at the lows and another round of upside bounce is likely to resume from the higher lows. However, a decisive upside breakout of 23,500-23,600 levels could open more upside ahead. Immediate support is placed at 23,200 levels, said Nagaraj Shetti of HDFC Securities.

In the open interest (OI) data, the highest OI on the call side was observed at 23,800, while on the put side, the highest OI was at 23,600 strike price followed by 23,700.

What should traders do? Here’s what analysts said:

Praveen Dwarakanath, Hedged.inNifty continued its upside journey towards the resistance of the 23,800 level after taking support from the middle of the Bollinger band, indicating strength in the index. The momentum indicators on the hourly chart continue to show positive momentum, indicating bullishness in the index. The index formed a professional gap after yesterday’s fall, suggesting the momentum to continue to the resistance at the 23,800 level. Options writer’s data for the weekly expiry showed increased writing of puts at the 23,800 and below levels and a short covering in the ITM calls, indicating a bullishness in the index.

Rupak De, LKP Securities

The Nifty has moved up following a falling wedge pattern retest, indicating the possibility of a decent rally in the short term. Additionally, the index has been sustaining above the critical 21EMA on the daily timeframe. The RSI is in a bullish crossover and rising after forming a base on the daily timeframe, indicating strong momentum. In the short term, the index may move toward 24,050 and higher, while support levels are placed at 23,500 and 23,250.

Satish Chandra Aluri, Lemonn Markets Desk

Benchmark indices rallied sharply on Tuesday on easing global worries as investors looked forward to the upcoming RBI meeting on expectations of the first rate cut in more than 4 years. It’s a broad-based rally with broader mid and small caps also posting strong gains while beaten down PSE, Energy and Infra stocks also staging a strong rebound post-budget disappointment. Nifty 50 opened strongly, and gains accelerated in the afternoon session with the next resistance around the 23,800 levels.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)