Nifty closes above 19,500 for the first time with fear gauge at historic lows
On July 14, there was a significant late-hour surge in the stock market that had a notable impact. This surge broke the consolidation range of 19,300-19,500 that had been observed in the previous trading sessions. As a result, the benchmark Nifty50 index closed above 19,500 for the first time. This surge was attributed to short-covering activity at the 19,500 Calls, which likely contributed to the upward movement in prices.
Throughout the trading session, the Nifty50 index remained higher, and this upward movement was primarily driven by bullish sentiment in the IT (Information Technology) sector. The IT bulls, or investors with positive outlooks on IT stocks, likely played a significant role in supporting the market and pushing the index higher.
Additionally, it is mentioned that the volatility dropped to near-historic levels. This suggests that the market experienced a decrease in price fluctuations or uncertainty, potentially indicating a period of relative stability and confidence among investors. When volatility decreases, it can be interpreted as a sign of market participants’ increased comfort and reduced anxiety regarding potential price swings.
Overall, the late-hour surge, short-covering at 19,500 Calls, bullish sentiment in the IT sector, and reduced volatility were the key factors that influenced the market dynamics on July 14.
During the week in question, the Nifty50 index showed a positive bias and opened higher at 19,493. Throughout the trading sessions, it remained rangebound but with an overall upward trend. In the final hour of trading, the bulls gained strength, resulting in the index reaching a fresh all-time high of 19,595. The session concluded with the index closing at a new record high of 19,564, marking a gain of 151 points for the day.
The daily candlestick pattern formed on the charts indicated a bullish signal. A bullish candlestick pattern typically suggests that buyers were dominant during the trading session, leading to a higher close. The presence of above-average volumes further supports the significance of this bullish pattern.
Zooming out to the weekly scale, the Nifty50 index displayed a consistent upward movement. The index rose 1.2 percent over the week and formed a bullish candlestick pattern with long lower shadows and small upper shadows. This candlestick pattern indicates that despite some selling pressure during the week, buyers were able to regain control, resulting in higher closing prices.
Furthermore, the index made higher highs for the 16th consecutive week, indicating a sustained upward trend over an extended period.
In summary, the Nifty50 index showed a positive bias during the week, with the bulls gaining strength and driving the index to new all-time highs. Both the daily and weekly candlestick patterns suggested bullish market sentiment, supported by above-average volumes and a consistent series of higher highs on the weekly scale.
The Nifty50 index experienced a breakout of an upward sloping resistance trendline that connected the highs of December 1, 2022, and July 7, 2023. This breakout is considered a positive sign for the market as it indicates a potential continuation of the upward trend. As a result of this breakout, the support base for the Nifty has shifted higher, now resting at around 19,200 levels compared to the previous support level of 19,000.
According to experts, the next hurdle for the Nifty is expected to be at 19,600, followed by a range of 19,800-20,000. These levels are seen as potential resistance zones that the index may encounter as it continues to climb.
Nagaraj Shetti, a technical research analyst at HDFC Securities, noted that the weekly chart of the Nifty formed a long bullish candle, which has invalidated the bearish candle from the previous week. This development is seen as a confirmation of the upside breakout, and if the market sees a follow-through upmove on Monday, it is expected to open up further upside potential.
Shetti also mentioned that after surpassing the crucial resistance level of 19,500 (which is calculated using the 1.236 percent Fibonacci projection from a recent bottom to top and then bottom), the next upside target to watch for is around 19,800, corresponding to the 1.382 percent Fibonacci projection level. This level is considered the next potential target for the Nifty in the coming week. Additionally, he indicated that immediate support for the index is at 19,470 levels.
According to the options data, the maximum Call open interest was observed at the 19,600 strike, followed by the 20,000 strike. There was significant Call writing at the 19,800 and 19,700 strikes. On the other hand, the maximum Put open interest was at the 19,500 strike, followed by the 19,400 strike. Put writing was observed at the 19,400 and 19,500 strikes.
Based on this data, it suggests that the immediate resistance levels for the Nifty50 index are expected to be around 19,600-19,700. Conversely, the immediate support levels are anticipated to be in the 19,500-19,400 range.
Rahul K Ghose, Founder & CEO at Hedged, believes that the Bank Nifty index is worth watching in the upcoming week. The index showed a gain of 154 points and formed a Hammer candlestick pattern on the daily charts after a recent downtrend. The Hammer pattern is considered a bullish reversal pattern. Additionally, the Bank Nifty index has not broken the horizontal resistance trendline during the recent decline, which is viewed as a positive sign.
Ghose further explained that the Bank Nifty closed with a Bullish Hammer candle right on its 20-day exponential moving average (44,554), indicating support at this average. He expects this move to be the start of the Bank Nifty’s momentum, with a potential to cross its near-term hurdle of 45,200 in the coming week.
In summary, the options data suggests resistance levels at 19,600-19,700 and support levels at 19,500-19,400 for the Nifty50 index. Additionally, market expert Rahul K Ghose highlighted the Bank Nifty index, which showed a bullish Hammer pattern and support at the 20-day exponential moving average. Ghose anticipates the Bank Nifty to gain momentum and potentially overcome the near-term hurdle at 45,200 in the upcoming week.
Over the course of the week, the Bank Nifty index experienced a slight decline of just over 100 points.
The India VIX, which is an indicator used to measure the expected volatility in the Nifty50 index over the next 30 days, decreased by 2.33 percent. It went from 10.94 levels to 10.68 levels, reaching its lowest level since December 2019. This drop in volatility indicates a more favorable trend for the bulls in the market.
To summarize, the Bank Nifty index witnessed a minor decline during the week, while the India VIX, representing expected volatility, decreased to its lowest level in over a year, indicating a more favorable market trend for bullish investors.
