Technical View: Nifty forms small bearish candle; 10,777 crucial for bulls next week

June 01
18:28 2018

Kshitij Anand

The Nifty50 which started with a muted note failed to hold on to its crucial support placed at 10,700 on Friday to form a small bearish candle on the daily candlestick charts, and a Spinning Top of an indecisive pattern on the weekly charts.

The index is stuck in a range of 10,550 on the downside and 10,777 on the higher side. If bulls have to regain control then a close above 10,777 is required.

But, looking at the momentum, we are witnessing strong buying at lower levels; hence there is a high possibility of consolidation in the coming week.

The Nifty50 which opened at 10,738.45 rose to an intraday high of 10,764.75 before bears took control. The index slipped below its crucial support placed at 10,700 to hit an intraday low of 10,681.50 before closing the day at 10,696.20, down 0.37 percent.

“The Nifty50 signed off the last day of the week with a small bearish candle formation whereas the weekly price action resulted in a Spinning Top kind of indecisive formation. As broader markets are under pressure with advance-decline ratio consistently favoring bears,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“However, as no technical parameter has generated fresh sell signals on lower time frame charts market may resume its strength if it manages a close above 10,777 levels in next couple of trading sessions,” he said.

Mohammad further added that contrary to this if weakness persists then indices may once again retest recent lows of 10,550 levels. “Essentially it looks that markers are directionless and stuck up in a range of 10,750 to 10,550levels. Unless they come out of this range a directional move may not emerge in near future,” he added.

India VIX moved up by 2.65 percent at 13.57 levels. On the options front, maximum Put OI is placed at 10,600 followed by 10,200 strikes while maximum Call OI is placed at 11,000 followed by 10,700 and 10,800 strikes.

“We have seen Put writing at 10700 followed by 10500 strikes while Call writing is seen at 10700 then 11000 strikes. Option data suggests a broader trading range in between 10600 to 10900 zones for next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty50 index remained negative to range bound and formed a small Bearish candle on the daily scale. It has formed a Spinning Candle with long shadows followed by a Dragon Fly Doji on the weekly scale which indicates a tough fight between bulls and bear,” he said.

Taparia further added that the immediate trend is positive but follow up buying is missing at higher levels. Now, it has to continue to hold above 10,650 zones to extend its gains towards 10,780 then 10,888 zones while on the downside supports is seen at 10,620 levels.

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