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Technical View: Nifty forms robust bull candle; next target at 10,826 levels

June 06
18:29 2018

Kshitij Anand

The Nifty50 which started on a bullish note build on to the momentum and rallied past 10,650 levels after the Reserve Bank of India’s monetary policy committee (MPC) raised repo rates by 25 bps but maintained its stance at neutral.

The Nifty50 index made a strong bullish candle on the daily charts and has now moved above crucial short-term moving averages such as 5, 13 and 20-EMA.

The Nifty made a bullish candle after a ‘Hammer’ like pattern which is a bullish sign and suggests that follow-up buying could be seen in the next few sessions as well.

But, are we out of the woods? Maybe not. The Nifty50 will face its first immediate hurdle at 10,700, and then towards 10,770 before it moves to its next target placed around 10,800-10,826. All long positions should be placed with a stop below 10,587.

The Nifty50 which opened at 10,603.45 slipped marginally at 10,587 before bulls took charge of D-Street. The index rose to an intraday high of 10,698.35 before closing 91 points higher at 10,684.

“A robust bull candle on Nifty50 chart is clearly suggesting that the index made an attempt to start a fresh leg of the upswing from the recent lows of 10,550 which should logically take it beyond 10770 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Albeit, the advance-decline ratio is stronger, a tepid participation from Bank index post-RBI monetary policy accompanied with lack of a ‘buy’ signals on any of the technical oscillators on lower time frame charts shall be a cause for concern going forward. Hence, a follow-through buying in next session can be used as a catalyst to confirm the beginning of a fresh upswing,” he said.

Mohammad further added that a strong close beyond 10,770 can only confirm a bottom in place around recent lows of 10,550 but also take the indices to much higher levels with the initial target placed around 10,826, a stop should be kept below 10,587.

Bank Nifty formed a Hammer candle followed by a Long Legged Doji Candle on the daily scale indicates that decline was bought. It managed to hold above its crucial rising trend line which is formed by connecting swing lows of 24753, 25662, 25668 and 26069.

Now, the index has to hold above 26,250 zones to witness an up move towards 26,500 then 26600 levels while on the downside immediate support is seen at 26,100 then 25,950 zones for immediate basis, suggest experts.

India VIX fell down by 5.78 percent at 12.55 levels. Falling volatility with rising Put Call Ratio suggests an overall bullish bias of the market.

On the options front, maximum Put OI is placed at 10600 followed by 10200 and 10500 strikes while maximum Call OI is placed at 11000 followed by 10800 and 10700 strikes.

“We have seen significant Put writing at 10,600 and 10,500 strikes while Call writing is seen at 10,800 and 10,900 strikes. Option data suggests a broader trading range in between 10,600 to 10,800 zones for next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty index managed to hold its 50-DEMA after the previous day’s support of 10,550 and headed towards 10,700 zones. It formed a Bullish candle followed by a long lower shadow candle on the daily scale indicates that bulls are ready to hold the grip on declines,” he said.

Now, Nifty has to continue to hold above 10,650 to extend its move towards next major hurdle at 10,765 zones while on downside supports are seen at 10,620 then 10,550 zones.

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