Stock Market

Tech View: Nifty bounces back from 13-day EMA, makes ‘bullish belt hold’ pattern

The Nifty, on expected lines, managed to stage a smart bounceback from its crucial 13-day EMA placed at 9,043 on Thursday to make a bullish candle, which closely resembled that of ‘bullish belt hold’ pattern on the daily candlestick charts.

A ‘bullish belt hold’ pattern is formed during a downtrend movement. It results in bullish candlestick pattern which gets formed after a stretch of bearish candles. The Nifty was consolidating in a tight range for the past 4 trading sessions.

Under the bullish belt hold pattern, the opening prices become the lowest point of the day as bulls push the price higher throughout the trading session to form the large body. The exact pattern would have no lower shadow and a small upper shadow.

The Nifty index opened at 9,048.75 which was close to the intraday low of 9048.60 formed in the opening trade. The index managed to rally over 50 points to touch its intraday high of 9,099.55 but closed 55 points higher at 9,086.30 which made a small upper shadow.

Formation of a bullish belt hold pattern after an inverted hammer is indeed a positive sign for the bulls and traders who went long on the index need not worry and keep a trailing stop loss at 9,019 levels for all long positions.

“The Nifty registered a bullish belt hold kind of formation as it smartly rallied from the critical zones placed around 9,030 levels. In this process, it closed above the 13-days exponential moving average below which it whipsawed in last trading session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told moneycontrol.

“The Nifty also filled the downside gap zone of 9,087 – 9,073 witnessed in the previous trading session suggesting that correction might have ended at a low of 9,019 which could now be kept as a stop loss of all long positions,” he said.

The Nifty has negated its formation of lower highs and lower lows formed in the previous three sessions and now a hold above 9,075 could extend its momentum towards 9,160 zone while on the downside supports are seen at 9,050 and 9,020, suggest experts.

Traders shall continue to maintain positive stance and take fresh positions on the long side with a trailing stop below 9019-9020 levels for a target of 9,400-9,600 in next few weeks.

The Nifty closed a tad below this important 13-day EMA on Wednesday and history suggests that whenever the index closed below this level, it bounced back immediately in the next 1-3 sessions.

The Nifty seem to have a rock solid support in the vicinity of ’13-day EMA’ as well as ’20-day EMA’ i.e. 9,043 – 8,996. The gap area of 9,020 – 8,975 was seen as a strong support level for the index and a bounce back was on cards.

“Despite this strong corrective move in the previous session, we reiterate that the Nifty50 is likely to head towards 9,400 – 9,600 (price extension of the previous up move from the recent low of 7893.80) over the next few weeks,” Sameet Chavan- Chief Analyst, Technicals & Derivatives at Angel Broking told moneycontrol.

“Having said that, in between some consolidation or a profit booking by momentum traders cannot be ruled out. Traders waiting for dips to initiate fresh longs post the UP election outcome should not get carried away by this pessimism,” he said.