Technical View: Nifty forms bullish candle, may march towards 200-DEMA of 10,767

October 10
18:29 2018

Bulls made a strong come back on Wednesday. The Nifty50 after gap up opening continued to inch higher as the day progressed and reclaimed 10,450 levels, driven by financial space after SBI decided to purchase loan assets worth up to Rs 45,000 crore from NBFCs.

The index closed sharply higher and formed bullish candle on the daily charts, negating the formation of lower highs for previous six consecutive trading sessions.

If the 50-share NSE index sustains above 10,300 levels then it can cross 10,700 levels followed by 10,850 levels, the critical hurdle, experts said.

The Nifty50 opened higher at 10,331.85 and extended gains as the day progressed. The index touched an intraday high of 10,482.35, before closing 159.10 points higher at 10,460.10.

“It was heartening to see Nifty50 making a strong come back, with a decent bullish candle, after a brutal correction market witnessed in last couple of weeks. This upmove looks broad based and secular with strong participation from all the sectors except IT,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said sustaining above 10,300 kind of levels in next couple of trading sessions Nifty50 can make an attempt to test 200-Day Exponential Moving Average whose value is placed around 10,767 levels.

“Interestingly it also coincides with the bearish gap zone of 10,754–10,843 formed on October 4. So, on the upsides 10,850 can be a critical hurdle which can cap the potential upsides going forward,” he added.

He feels inspite of this short term bullishness today’s spike shall continue to remain part of a pull back attempt and in case Nifty50 slips below 10,300 levels then recent low of 10,198 will again come under attack as culmination of corrective pattern requires Nifty50 to slip below 9,950 levels.

India VIX fell by 8.83 percent to 18.01 levels. Decline in VIX from higher levels with a topping out formation have given a short term stability and immediate bounce back move to the market. Now VIX has to further cool down below 16-15 zones to extend the market recovery, experts said.

On option front, maximum Put open interest (OI) is at 10,000 followed by 10,500 strike while maximum Call OI is at 11,000 followed by 10,800 strikes. Put writing was seen at 10,400 and 10,500 strikes while Call unwinding was seen at all the immediate strike price. Option band signifies a hold of support at lower zones with a broader trading band between 10,300 to 10,600 levels.

“Recently the Nifty has taken support at its rising trend line by connecting its major swing lows of 6,825, 7,893 and 10,200 zones on weekly chart and now an immediate hold above 10,350 zones could extends its bounce towards 10,500-10,550 and even higher levels while on the downside supports are seen at 10,300 then 10,200 marks,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.

Bank Nifty formed a strong bullish candle with the bigger real body of the gains of around 3 percent and almost recovered the losses made in the previous week. It has seen the strong momentum till the end of session led by buying interest in many Private and PSU banks. The index closed 794.05 points higher at 25,321.70.

“Now it has to cross and hold above 25,000 zones to extend its bounce towards 25,500 then 25,650 zones while on the downside support is seen at 24,750 zones,” Taparia said.

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