The Nifty recovered from a key support zone and closed at the day's high, reclaiming its 20-day moving average and eight-day exponential moving average ahead of the monthly derivatives expiry. The index also avoided a breakdown from a bearish flag pattern for the second consecutive session, while broader market participation improved.
The recovery comes as traders prepare for the monthly derivatives expiry, when volatility could rise and short covering could support the market. The Nifty's ability to hold above key support levels, along with rollover activity, will be important in assessing whether the rebound can continue.
Key Levels
The Nifty opened with a gap down and approached Friday's low before recovering to close above the previous session's low. The past two sessions have formed a pattern resembling a Tweezer Bottom, with the index recording nearly identical lows in both sessions. This suggests buying interest at lower levels.
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Market breadth also improved during the recovery. Of the Nifty 500 constituents, 334 stocks closed higher, while 36 Nifty 50 constituents ended in positive territory. Most sectoral indices also gained, indicating that the rebound extended beyond a handful of stocks.
The Nifty closed above the 38.2% retracement level of its recent decline and moved back above its 200-week moving average.
The 22,372–22,400 zone remains a key support area. Holding above this range will be important for sustaining the recovery. A close above the 22,785–22,820 resistance zone could extend the rally towards 23,000–23,070.
A fall below 22,550, however, could revive selling pressure and drag the index towards 22,300–22,200.
With the monthly derivatives expiry approaching, traders should watch for higher volatility and further short covering. Rollover activity could also provide clues about market positioning.
Coforge Setup
Coforge is trading near the pivot point of a nine-week cup-and-handle pattern and close to its all-time high. Trading volumes have risen compared with recent sessions, while the stock's Relative Strength line has reached a new high, indicating outperformance.
The stock continues to trade above its key short- and long-term moving averages. Its Bollinger Bands have also widened, suggesting rising volatility as the price approaches a potential breakout.
Momentum indicators support the positive technical setup. The Moving Average Convergence Divergence indicator remains positive across multiple time frames, while the 14-period daily Relative Strength Index is firmly in bullish territory.
On the weekly chart, the RSI has shifted into the super-bullish zone and has consistently held above 60. The Know Sure Thing indicator remains bullish, while the Stochastic RSI is approaching a bullish crossover. The Elder Impulse System has also registered a bullish bar.
Together, the price structure, rising volumes and momentum indicators suggest that Coforge is approaching a potential breakout.
A sustained move above Rs 1,995 could pave the way for a test of Rs 2,065 and a possible new all-time high. The suggested stop-loss is Rs 1,935. A further move above Rs 2,090 could open the way towards Rs 2,150.
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