Technical View: Nifty forms bullish candle on weekly charts; 10,785 crucial for bulls

May 11
17:29 2018

Kshitij Anand

The Nifty50 which started with a gap-up on Friday continued its journey of making higher highs and higher lows and closed above its crucial resistance levels of 10,785-10,800 on daily charts. The index formed a bullish candle on the daily as well as weekly charts.

Formation of a bullish candle negates the formation of a bearish candle formed in the previous trading session. Hence, investors are advised to stay cautious ahead of the Karnataka election outcome next week.

Level of 10,785 which acted as a crucial resistance level for the index this week will now act as a crucial support for the index. Hence, a break below this level could open room for bears to enter.

“The market appears to be defying gravity as it registered a strong bullish candle both on daily as well as weekly charts thereby negating the bearish technical formations witnessed in Thursday’s session,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“However, today’s rally is on the back of weak advance-decline ratio which remained skewed in favour of bears. Besides, the rally appears to have driven mainly by financials and metals whereas all other indices either remained flat or registered a negative close which should be a cause of concern,” he said.

Mohammad further added that another major technical development appears to be a buy signal on weekly MACD charts suggesting that medium-term uptrend may be strengthening further. Hence, purely on technical grounds, there is a case for the continuation of upmove.

India VIX fell down by 3.07 percent at 13.97. A decline in VIX ahead of the event suggests that participants are not much worried from the outcome of the Karnataka Election result.

However, VIX is near to comfort zones of 13.50 and post the event OTM option can decline sharply because of a dip in volatility, suggest experts.

On the options front, maximum Put OI is placed at 10,500 followed by 10,600 strikes while maximum Call OI is placed at 11,000 followed by 10,800 strikes.

Fresh Put writing was seen at 10,700 followed by 10,600 which is shifting its support to higher zones while marginal Call writing was seen at 11,050 and then towards 10,800 strikes.

“Option data suggests an immediate trading range between 10700 to 10900 zones. The Nifty formed a Bullish candle on the daily and weekly scale by surpassing immediate hurdle of 10785 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index has given a decisive close above 10800 zones after the consolidation of last 10 trading sessions in between 10,600 to 10,785 zones. It continued the formation of higher highs – higher lows on the weekly scale for the seventh consecutive week which indicates that bulls are holding the tight grip and supports are gradually shifting higher,” he said.

Taparia further added that Nifty has to hold above 10,785 zones to extend its move towards 10,888 then 10,950 zones while on the downside supports are seen at 10,725 then 10,680 levels.

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