The Nifty bounced back after two days of losses to close 87 points, or 0.50 percent, higher at 17,577.50 after a volatile session on August 23.
The index formed a bullish candle on the daily charts that resembled the piercing formation. The piercing pattern is a bullish trend reversal or bottom reversal pattern that appears towards the end of a downtrend.
The index closed above 17,500 by taking support at 17,350 levels. If it respects the support in the coming sessions and closes above 17,710, the low of August 19, then the upward journey will continue, experts said.
Follow-through buying in the next session may result in the temporary bottom at a low of 17,345 levels, Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia said.
In that scenario, the index can make an attempt to bridge the bearish gap present between 17,690 and 17,710, registered on August 22, and a close above 17,710 can strengthen the optimism.
If the index closes below 17,345, weakness will resume, with downside targets placed in the zone of 17,000 and 16,950.
For the time being any weakness can be considered an opportunity to create fresh shorts, the market expert said.
All sectors, barring IT, contributed to the recovery. The broader markets also participated in the rally. The Nifty Midcap 100 and Smallcap 100 indices gained more than a percent each.
Also read: Tech stocks stay in the red for 4th session, BSE IT index hits a 3-week low
India VIX, the gauge of expected volatility in the market, remained elevated. The VIX was 0.06 percent to 19.05 levels.
On the Options front, the maximum Call open interest was seen at 18,000 strike followed by 18,500 strike, while maximum Put open interest was seen at 17,000 strike then 17,500 strike.
Call writing was seen at 17,900 strike followed by 17,800 strike while Put writing was seen at 17,400 strike then 17,500 strike. This Option data suggested that the Nifty may trade in the 17,350-17,800 range in the immediate term.
Also read: Taking Stock | Market snaps 2-day losing streak; Sensex up 257 points, Nifty above 17,550
The Bank Nifty also opened negative at 37,955 but witnessed a pullback move. It recovered by more than 900 points from its low to hit an intraday high of 38,870 and closed 400 points higher at 38,698.
The index formed a Bullish Engulfing candlestick on the daily scale and wiped off the bearish sentiments of the last two sessions.
It has to hold above 38,500 to make an up move towards 39,250 and 39,500, whereas supports are placed at 38,500 and 38,250 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services, said.
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