Nifty posted the third biggest single day gain to close above 8300 level, with positive advance : decline ratio ahead of expiry of March derivative contracts. Nifty formed a bullish Candle on daily chart, closes above 5Days EMA for the first time since 20 Feb 2020, as the closing values were much higher than the opening.
Nifty opened lower at 7735 and hit the day's low of 7714 amid volatility but gradually gained strength and hit an intraday high of 8376 in the last hour of the trade.
This is the first time that the Nifty managed to show such strength in the current market turmoil that started in late February due to the fast spreading coronavirus.
For the first time in this strong downfall, Nifty not only closed above its 5day EMA (which is placed at 8254) but also bridged the bearish gap present in the zone of 8159 /8178 level, hinting at a near term strength. Therefore sustaining above 7511 level, the Nifty shall eventually embark on a decent pullback rally with initial targets present around 8575 level.
The recent positive announcements from the US Fed and rising hopes of a stimulus package from the Indian government have lifted sentiments. Going forward, we expect volatility would remain high in the near term and any sustainable rally would largely depend upon how effectively we can contain the spread of Coronavirus now with a 21day nationwide lockdown in place.
A phase of relief rally seems to be unfolding and once the index sustains above 8300 zone expect a larger recovery towards 9000 plus. Short covering rallies a sharper at least in the first phase of recovery.
Traders with a high risk appetite are advised to make use of dip into 8000/7900 zone to create fresh long positions in the index with stop below 7511 and look bigger target of 8575.
All the sectoral indices ended in the green.
- Someshwar, Technical analyst, Equidius Research