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By Chandan TapariaThe Nifty50 index opened flat and slipped towards 10,820 level in the first half of Monday’s session.
However, it witnessed a sharp recovery from the lows in the second half, as it turned near t o its 50% retracement of the entire upswing from 9,952 to 11,760 levels.
The index formed a bullish candle on the daily scale and managed to negate the formation of lower highs of last three sessions.
It also witnessed a positive divergence on the daily scale, as technical indicators like RSI did not make any new low.
Now, it has to hold above the psychologically important 11,000 mark to witness support-based buying towards 11,080 and then 11,171 levels, while on the downside major support exists at 10,850 level.
On the options front, maximum Put open interest was at 10,800 followed by 11,000, while maximum Call OI was at 11,500 followed by 11,200.
Meaningful Put writing was seen at strike price 10,700 followed by 10,500, while there was Call writing at 11,000 followed by 10,900.
The option band signified a trading range between 10,850 and 11,171 levels.
India VIX fell 0.97 per cent to 16.83 level.
Volatility has to cool down to form a short-term top, only then can Nifty form a short-term bottom for a temporary bounceback.
Bank Nifty managed to respect its recent swing low of 24,678 and recovered sharply towards 25,400 mark.
It formed a double bottom and a bullish candle on the daily scale followed by a Doji, which indicated that a short-term bottom could be in place for the rate-sensitive index.
Now, it has to hold above 25,000 to extend its bounce towards 25,650 and then 26,000 levels, while on the downside major support is seen in the 24,700-24,650 zone.
Nifty futures closed positive with a gain of 1.07 per cent at 11072.
Longs were seen in Mindtree, Indiabulls Housing Finance, DHFL and Ramco Cements whereas shorts were seen in Kotak Bank, IndusInd Bank, Havells and PEL.
(Chandan Taparia is Technical Derivative Analyst at Motilal Oswal Securities.
Investors are advised to consult financial advisers before taking an investment calls based on these observations)
