Technical View: Nifty forms strong bull candle; reclaims 200-DMA

April 02
17:29 2018

The Nifty50 which started on a bullish note kept the momentum going as the index reclaimed its crucial resistance level of 10,200 on the first trading day of FY19. The index rose past its crucial 200-days moving average (DMA) placed at 10,182 in trade today.

Formation of a strong bull candle after a bearish candle suggests that bulls have taken over D-Street at least in the near term and as long as Nifty sustains above 10200 levels the bulls are likely to take the index towards 10350 levels.

Bulls appear to have started the new series (April series) on firm footing as they made a strong come back which erased the losses recorded in the last two trading sessions.

The Nifty index which opened at 10,151 slipped to an intraday low of 10127 in morning trade. The bulls pushed the index above 10200 levels to hit an intraday high of 10,220.10 before closing the trade at 10,211 up 98 points.

“Bulls appears to have started new series on firm footing as they made a strong come back with a robust bull candle. Technically speaking last 8 days of price action chalked out a small but clear inverted head and shoulder kind of formation on lower time frame charts which is suggesting a possibility of round 250 point rally for Nifty50 in near term provided the index sustains above 10200 marks,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“Besides, the index is moving in a descending channel since the highs of 10631 registered on 27th of February whose breakout point is placed around 10260 levels. Once Nifty50 registers a decisive breakout above the said channel then it shall strengthen the case for a durable bottom around 9950 levels,” he said.

Mohammad further added that if the strength continues traders should expect modest targets of around 10350 on the indices. “Traders are advised to ride the current leg of up move with a stop below 10100 on a closing basis and look for bigger targets,” he said.

India VIX fell down by 2.62% at 15.35. On the options front, maximum Put OI was placed at 10000 followed by 9800 strikes while maximum Call OI is at 11000 followed by 10500 strikes.

“Fresh Put writing at 10000 and 10100 strikes while Call writing is seen at 10300 and 10200 strikes. Option data suggests an immediate trading range in between 10050 to 10350 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty managed to hold above previous weeks’ close and formed a Bullish candle on the daily scale. Now it has to continue to hold above 10,222 to extend its move towards 10,276 then 10,333 levels while supports are seen at 10,141 then 10,050 zones,” he said.

Taparia further added that the index has been making the lower top – lower bottom on a weekly scale so it needs to surpass its 61.80% retracement of 10276 to negate the short-term negativity.

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