The Nifty witnessed a volatile trading session on Monday, moving within a 224.70-point range before ending in positive territory above the 22,550 mark. The index opened on a firm note and climbed to an intraday high of 22,621.80 during the first hour of trade.
However, selling pressure emerged at higher levels, forcing the index to give up most of its early gains and slip below 22,400. Buying interest returned in the second half of the session, helping the Nifty recover more than 150 points from the day's lows.
The index eventually closed above 22,550, indicating some buying support after the recent decline. High-wave candle reflects indecision. Monday's price action formed a small bullish-bodied candle with long upper and lower shadows, resembling a high-wave candle pattern.
Such a formation reflects indecision, with both buyers and sellers active during the session. As the pattern has appeared after a sustained decline, it may indicate that downside momentum is easing. However, the candle by itself does not confirm a reversal and requires follow-through buying in the next session.
One positive development was that the Nifty protected the previous session's low and formed both a higher high and a higher low. This improves the short-term price structure, although the index was unable to close above the previous day's high.22,622 becomes the immediate triggerFor the current recovery to gain strength, the Nifty needs to close above Monday's high of 22,622.
A sustained move above this level would strengthen the possibility of a short-term reversal. If this breakout materializes, the 8-day EMA, currently placed around 22,779, is likely to act as the next important resistance as well as the immediate upside target.
On the other hand, a negative close in the next session would weaken Monday's recovery and reduce the significance of the high-wave formation.22,217 remains the key supportOn the downside, last Thursday's low of 22,217 remains the crucial short-term support.
As long as the index holds above this level, the possibility of a recovery remains intact. A break below it would again shift the near-term bias in favour of the bears. RSI still signals weak momentumDespite Monday's rebound, the 14-period daily RSI continues to remain below 30 and therefore stays in the oversold zone.
This suggests that momentum is still weak, even though the index has started showing early signs of stabilization. A recovery in the RSI above the oversold region, accompanied by a breakout above 22,622, would provide stronger confirmation that short-term momentum is beginning to improve.
Stock to Watch: LG Electronics IndiaThe stock has broken out of its IPO base and closed above the listing-day high. It also registered an all-time high closing level. Volumes were higher, confirming the breakout. Its relative strength line has reached a new high, indicating outperformance against the broader market.
The stock is trading above all key short- and long-term moving averages. The Bollinger Bands are expanding, while the moving average ribbon remains in an uptrend. The MACD continues to remain bullish. The 14-period daily RSI has witnessed a range shift into the super-bullish territory.
The Elder Impulse System has also formed a strong bullish bar. Overall, the stock has registered a bullish breakout. A move above ₹1,800 would remain positive and could take the stock towards ₹1,872. Maintain a stop loss at ₹1,740. Above ₹1,872, the next target is placed at ₹1,930.