Tech View: Nifty50 forms Long White Day; be alert on midcaps

The Nifty50 soared nearly 150 points on Thursday to close above the crucial level of 9,500. In the process, the index formed a ‘long bullish candle’ or ‘long white day’ kind of pattern on the daily candlestick charts.

A ‘Long White Day’ signals that the market witnessed sustained buying interest from the bulls for most part of the day, which is a bullish sign that could have been led by short covering as the May series F&O contracts expired on Thursday.

Before closing at 149 points higher at 9,509, the Nifty touched an intraday high and low of 9,523 and 9,379, respectively. The index had opened the day at 9,384.

Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory, Chartviewindia.in, said: “The Nifty50 witnessed a Long White Day kind of formation, as it surprisingly made a strong comeback, signalling the end of short-term correction at the recent low of 9,341. This big surprising move can be harbinger of a bigger rally awaiting the indices. One of our bullish alternative counts, based on the Elliot Wave theory on lower time frame charts, is vindicating the current move and projecting bigger rallies going forward.”

The index almost engulfed the price consolidation of last five sessions on Thursday. Chandan Taparia, Derivatives & Technical Analyst, Motilal Oswal said, “The Nifty50 made a long bullish candle on the daily chart by negating the formation of lower highs of last three sessions. Now, it has to hold above the 9,450 level to witness any upmove towards 9,550 and 9,600 levels, while on the downside supports exist 9,420 and 9,380 levels.”

On the option front, the maximum Put open interest (OI) for the June series was seen at strike price 9,000, followed by 9,300 and 9,400 while maximum Call open interest stood at strike price 9,600.

However, option concentration was scattered at different strike prices at the beginning of a new series, but a shift in Call open interest congestion to higher strike prices creates scope for the further upside in the index.

“Based on the technical evidence, this move has certainly changed the trajectory of the market for the near term. We strongly advise trades to go for fresh longs,” said Mohammad.

Independent analyst Kunal Bothra told ETNow in an interview that he expects Nifty to head higher over the next one week or so.

“But do not bank on all the stocks in the midcap space, which have corrected 20-30 per cent to try and recuperate the entire loss. You might see a completely different set of stocks, especially from the largecap space, leading the next leg of rally. So remain stock specific and be very, very choosy,” Bothra said.

For benchmark Sensex, it was a terrific Thursday as the index closed at a new all-time high of 30,750, up 448 points.