Technical View: Nifty forms bullish candle; crucial for bulls to take index past 10,850
The Nifty50 started off on a flat note but gained solid strength in later part of the session on Wednesday after the Cabinet Committee approved the proposal to hike minimum support price (MSP) for all Kharif crops. The index closed above 10,750 levels, forming a Bullish Candle on the daily charts.
The 50-share NSE index also closed above its short-term moving averages such as 5-EMA, 13-EMA, as well as 50-EMA which is a bullish sign.
The index after opening at 10,715 traded in a tight range for most part of the morning session and hit an intraday low of 10,677.75. It gained strength in later part of the session to hit an intraday high of 10,777.15, before closing 70 points higher at 10,769.90.
After closing above the 50-EMA, now the real challenge for bulls is to cross the interim top placed around 10,850 levels, experts said, adding the further short covering then may push Nifty towards 11,000 levels.
“Inline with the expectation, Nifty50 rallied for second day in a row as the initial dip was bought before signing off the session with a bullish candle formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.com.
He said in this process bulls appears to have strengthened their position as Nifty50 changed its recent behaviour of forming bull and bear candle in alternate sessions suggesting near term strength. “However, in the near term, the real challenge for bulls lies in clearing the interim top placed around 10,850 levels. If bulls manage to conquer this top then the current upswing shall initially get extended upto 11,000 kinds of levels as a close above 10,810 will also result in a downsloping trend line breakout which is in progress from the highs of 11,171.”
On oscillator front daily MACD line appears to have taken support on its equilibrium line and turning on the upside which is usually considered as a very bullish sign, he said. “Hence bulls appears to be solidifying their grip over market for time being.”
India VIX fell down up by 2.62 percent at 12.65 levels. Lower volatility indicates limited downside and decline is being bought in the market, experts said.
On the option front, maximum Put open interest (OI) was seen at 10,600 followed by 10,500 strike while maximum Call OI was at 11,000 followed by 10,800 strike.
Put writing was seen at 10,600 followed by 10,800 while Call writing was seen at 10,800 and 10,900 strike price. Option band signifies an immediate trading range between 10,660 to 10,830 zones, experts said.
“Nifty index managed to respect its 50 DEMA and extended its gains towards 10,777 levels. It formed a Bullish Candle on daily scale and also forming higher lows from last two sessions. It closed near to its falling supply trend line by connecting swing high of 10,893 and 10,837 marks,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Securities told Moneycontrol.
According to him, if the index manages to hold above 10,777 then a breakout could attract fresh short covering trigger which may propel the index towards 10,835 then 10,888 zones. “While on the downside support exists at 10,700 then 10,660 zones.”
Bank Nifty finally negated its lower high formation on daily scale and extended its gains towards 26,480 zones.
“The index formed a Bullish Candle on daily scale with the support near to its 50-DEMA,” Taparia said, adding now it has to continue to hold above 26,250 to witness an up move towards 26,500 then 26,750 zones while on the downside support exist at 26,250 then 26,100 levels.