The Nifty 50 index started the August series expiry session on a weak note, maintaining a negative bias in the early part of the day. The index slipped below the crucial 24,150 mark and touched an intraday low of 24,115.45. Interestingly, this decline was halted near the upward-rising trendline support marked on the chart (dotted line), indicating buying interest at lower levels.
From the day's low, the index witnessed a sharp recovery as crude oil prices declined, which improved market sentiment. The Closing Auction Session (CAS) had a noticeable impact on the final settlement, helping the index close at the day's high of 24,334.55
Bullish Engulfing Pattern
The strong recovery resulted in the formation of a sizable bullish candle on the daily chart. The candle completely engulfed the price movement of the previous three trading sessions, forming a classic Bullish Engulfing pattern. This technical formation indicates a shift in short-term momentum and suggests that buyers have regained control after the recent decline.
First Monthly Expiry After Introduction of CAS
During the August series, the Nifty 50 gained 349 points or 1.45%. This was also the first monthly expiry session after the introduction of the Closing Auction Session (CAS).
Technical Indicators Turn Positive
The latest upmove has helped the index close above key technical levels. The Nifty 50 settled above its 50-DMA and 8-EMA.
Additionally, the index moved above the 38.2% Fibonacci retracement level of the recent decline from the August 3 high to the August 19 low. Momentum indicators have also shown signs of recovery. The 14-period daily RSI has moved back above the 52 mark, while the MACD line is positioned near the zero line. The MACD histogram suggests that the earlier bearish momentum is gradually weakening.
Key Levels to Track Ahead for September Series
Going forward, the immediate resistance for the Nifty 50 is placed in the 24,370-24,400 zone. This region coincides with the 20-DMA and the 50% Fibonacci retracement level of the recent decline. A decisive close above this zone could strengthen the recovery and open the possibility of a move towards 24,600-24,750 levels.
On the downside, the 24,203 level, which represents the 50-DMA, is expected to act as an immediate support. Below this, the next important support zone is placed near 24,060.
For the September series, sustaining above the 24,400 mark would be crucial for the bulls. A breakout above this level could pave the way for further upside towards the 24,600-24,750 range, while failure to hold above key moving averages may bring renewed selling pressure.
Stock to Watch: HDFC Asset Management Company (HDFCAMC)
HDFC Asset Management Company (HDFCAMC) has witnessed a bullish breakout after decisively moving above the neckline of a double bottom pattern. The stock also closed above the 50% Fibonacci retracement level of the previous decline, indicating improving price strength. The breakout was supported by above-average volumes, suggesting increased participation from market participants.
The technical setup has strengthened further, with the Mansfield Relative Strength line moving above its average, indicating improving relative performance. The stock is trading above its 10-week and 40-week moving averages, while the expansion of Bollinger Bands suggests increasing volatility in favour of the ongoing upmove.
The stock is also trading above its moving average ribbon. Momentum indicators have turned favourable, with the MACD line moving above the zero line and the histogram indicating strengthening momentum. The 14-period daily RSI has entered the bullish zone, while the Elder Impulse System has formed a strong bullish bar.
Overall, the stock has registered a bullish breakout across multiple technical indicators. A sustained move above Rs 2,675 could further strengthen the trend and open the possibility of a move towards Rs 2,760, followed by Rs 2,800 levels. The stop loss for the trade setup can be maintained at Rs 2,635.
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