Tech View: Nifty’s weekly bullish engulfing candle signals strength; key resistance at 23,800. How to trade on Monday

The Nifty index opened positive on Friday, witnessed profit booking and finally settled the day on a negative note at the 23,560 level. The volatility index, India VIX, dropped by 3.45% to 13.69, indicating a decrease in market volatility.Technically, Nifty formed a red candle on the daily scale, signifying weakness. However, on a weekly scale, the index formed a green candle, confirming the bullish engulfing candlestick pattern formed last week. On the downside, the index’s immediate support is placed around 23,430, where the short-term breakout point is located, while the resistance of the downward-sloping trend line is situated at 23,800. Considering the strong weekly structure, buy-on-dips approach should be adopted in Nifty, said Hrishikesh Yedve of Asit C. Mehta Investment Interrmediates.

According to the open interest (OI) data, the highest OI on the call side was observed at 23,800 and 23,600 strike prices, while on the put side, the highest OI was at 23,500 strike price followed by 23,300.

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

Praveen Dwarakanath, Hedged.inNifty is reacting from the upper part of the Bollinger band, more like a healthy correction after a small rally. The index has support at the 23,400 level, from where it bounced during the day’s fall. The index formed a red doji candle, with a big lower shadow, indicating a possible bounce from the present level. The momentum indicators on the daily scale point towards an upside from the current level. Options writer’s data for the monthly expiry showed increased writing of puts at 23,600 and below levels, indicating mild bullishness in the index.

Rupak De, LKP Securities

The Nifty remained volatile as the RBI Governor announced the monetary policy. However, the volatility did not push the index below the 21 EMA on the daily timeframe, signifying a positive short-term trend. The trend is likely to remain positive as long as the index stays above 23,450. On the higher end, resistance is placed at 23,700. A decisive move above 23,700 could lead to a rally toward 24,050.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)