Technical View: Nifty forms a bearish candle ahead of US Fed outcome; tread with caution

June 13
18:28 2018

The Nifty50 which started on a positive note failed to hold on to momentum and witnessed profit booking near 10,900 levels and made a bearish candle on an intraday basis.

Traders preferred to book profits ahead of the crucial US Fed outcome but the positive takeaway is that the index managed to close above 10,850 levels which was the intraday high recorded earlier this week on Monday.

The Nifty50 index opened gap-up but failed to hold above 10,888 and consolidated in a narrow range with a support placed at 10,850-10,800 levels. On the higher side, resistance is placed at 10,930 levels.

Bank Nifty remained range bound for the most part of the trading session but trading range is slightly shifting higher towards immediate hurdle of 26,750 zones.

The Nifty50 which opened at 10,887 rose to an intraday high of 10,893 but failed to hold on to morning gains and slipped towards 10,850. The index closed 13.85 points higher at 10,856.70.

“Despite a strong gap-up opening, bulls appears to have adopted a cautious stance ahead of the US Fed event as during the course of the day they have given up all the gains which resulted in a small bearish candle formation on intraday basis,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“Though imminent weakness is not visible, as all short term oscillators on lower time frame charts are in still buy mode, a close below 10,800 may set the tone for bear domination. On the other hand a close above 10,930 shall confirm strength there by paving the way for retest of life time highs present around 11,170 levels,” he said.

It looks prudent on the part of short-term traders to focus on individual stock specific opportunities with a stop below 10,800 on closing basis.

India VIX fell down by 1.65 percent at 12.52 levels. On the options front, maximum Put OI is placed at 10,700 followed by 10,600 strikes while maximum Call OI is placed at 11,000 followed by 10,900 strikes.

Significant Put additions was seen at 10,800 and 10,700 strikes while Call writing was seen at 11,100 and 11,000 strikes. “Option data suggests that supports are gradually shifting higher and an immediate trading range is likely to be in between 10750 to 10950 zones for next coming sessions,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty closed marginally positive but formed a Bearish candle as it slipped from its higher zones. However, it continued the formation of higher lows on daily scale but absence of follow up buying at higher zone is clearly visible in the market,” he said.

Taparia further added that it has to continue to hold above 10,770 zones to extend its move towards 10,888 and then towards 10,929 levels while major supports are shifting higher at 10,777 and then towards 10,720 zones.

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