The three-candlestick reversal formation suggests gains ahead. Analysts said the index needs to sustain above the 17,580 level for further upside.
Monday’s bounce occurred, as Nifty50 stabilised after testing its-20 day exponential moving average (EMA) in Friday’s session, said Mazhar Mohammad of Chartviewindia.in.
“As long as the index sustains above the 17,581 level, the index would eventually test the recent life time highs at the 17,950 level. However, Monday’s narrow candle body can be a cause for concern. If the index closes below the 17,580 level, it should be considered as a weak sign,” Mohammad said.
Independent analyst Manish Shah pointed out two reasons which suggest the index saw a reversal.
“First, an Island Reversal pattern was reversed on Monday as Nifty50 closed above the gap area. Besides, we saw a bullish Morning Star that was made at the support of a rising trendline. Nifty50 temporarily dipped below a 60-period RSI, before moving higher, giving us a buy signal,” Shah said.
For the day, the index closed at 17,691, up 159.20 points or 0.91 per cent.
“Nifty50 has settled above the 20-day moving average and the stochastic has given a positive crossover, which indicates a positive trend. On an hourly chart, the index has taken support from 21-EMA and sustained above the same. Also, the Parabolic SAR has formed below the candles, indicating bullish momentum. At present, the index has immediate support at 17580 while it has resistance at 17,950 level,” said Sachin Gupta of Choice Broking.
Chandan Taparia of Motilal Oswal Securities said the index has negated lower high formation after five sessions. He believes that the index would require to hold above 17,700 for an up move towards 17,777 and 17,850 levels. Support for the index is seen at 17,580 and 17,450 levels, he said.