Technical View: Nifty forms a bearish candle; keep a stop loss below 10,300
The Nifty50 which started on a muted note failed to keep the momentum going and the index slipped below its crucial short-term moving averages and made a bearish candle on Thursday.
The Nifty broke below its crucial support placed around 100-days exponential moving average (DEMA) placed around 10410, 13-DEMA, and 5-DEMA.
But, last hour buying keep the momentum favoring bulls, suggest experts. Investors who went long on the index should put a trailing stop loss below 10300.
The index which opened at 10,405 rose marginally to hit its intraday high of 10420 before bears took control. The selling pressure took the index to its intraday low of 10,346. The index closed 50 points lower at 10,360.
“Albeit Nifty50 registered a Bearish candle after moving in a range of 74 points before signing off the day near to its lowest point, its sluggishness of price behavior in last two sessions is suggesting that it is caught up in a consolidation phase in which both bulls and bears lack enough strength to push the indices in their favour for quite some time,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in
“However, the positive advance-decline ratio of last two sessions can tilt the tide in favour of bulls if 10300 levels on the downside is not breached on a closing basis as breakdown below this critical level may intensify selling pressure,” he said.
Mohammad further added that on the other hand for momentum to pick up in favour of bulls Nifty50 need to decisively close above 10480 levels. Meanwhile, traders are advised to remain focussed on stock specific opportunities till a directional move arises.
India VIX fell down marginally by 0.22 percent at 14.33. Volatility should ideally decline below 13-13.50 for the index to extend its recent bounce back move.
On the options front, maximum Put open interest is placed at 10000 followed by 10400 strikes while maximum Call open interest is placed at 10500 followed by 10400 and 10700 strikes.
Marginal Put unwinding was seen at all immediate strikes while intact Call writing was seen at 10500 followed by 10400 strikes which are restricting its upside move.
“Option band signifies a trading range between 10250 to 10500 zones. The Nifty index formed an Inside Bar as it traded inside the trading range of the last session. It failed to surpass previous day’s high of 10420 and corrected towards 10346 levels,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“The index has been finding multiple hurdles near to 10,440 zones while a hold below 10,333 could start a decline towards 10,276 then 10,200 zones,” he said.
Taparia further added that the Nifty index has seen a recovery from 10,141 to 10,478 in the recent up leg and if immediate support is not respected then bounce back could fizzle out but price structure suggests consolidation with limited upside in the market.