Technical View: Nifty forms bullish candle, gains for 3rd straight session; next target seen at 10,750

October 16
19:29 2018

The Nifty50 after gap up opening traded higher throughout the session amid volatility on Tuesday. The rally was driven by rupee appreciation, falling crude oil prices and good start to the September quarter earnings season.

The index closed higher for the third consecutive session and made a small bullish candle on the daily charts.

Experts said the 50-share NSE index is likely to move towards 10,750-10,850 levels till it holds 10,525 levels in the coming sessions.

The Nifty50 after opening higher at 10,550.15 retained positive trend for the entire session, and hit an intraday high of 10,604.90 and low of 10,525.30. The index closed 72.30 points higher at 10,584.80.

“Despite undertone remained bullish for the day, the Nifty50 appears to have made made most of the gains in the first one hour of trade before signing off the session with a small bullish candle suggesting a narrow range for the day,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“Hence, it looks inevitable for the said index to sustain above Tuesday’s low of 10,525 and witness follow through gains. In such a scenario a higher target between 10,750–10,850 levels can be expected,” he said.

Contrary to this if the index slips below Tuesday’s low of 10,525 levels then it can come under selling pressure, according to him. He advised traders to trail stoploss level below 10,500 levels on closing basis and look for higher targets.

India VIX fell sharply by 8.01 percent to 17.37. Falling volatility is giving comfort to bulls and a hold below 17 zones could extend its positive momentum, experts said.

On option front, maximum Put open interest (OI) is at 10,000 followed by 10,400 strike while maximum Call OI is at 11,000 followed by 10,800 strikes. The significant Put writing was seen at 10,500 followed by 10,600 strike while Call unwinding was seen at immediate strike price. Option band signifies a broader trading band between 10,450 to 10,700 zones.

“The Nifty formed a bullish candle and started to form higher highs – higher lows from last three trading sessions. Now it has to continue to hold above 10,525 zones to extend its move towards 10,650 and higher levels while on the downside support is shifting higher to 10,450 zones,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Index has recently recovered well by 400 points from its support and swing lows of 10,200-10,138 zones and now next medium term hurdle is placed at 200 SMA at 10,800 zones, he added.

Bank Nifty surpassed its crucial resistance of 25,500 zones after the consolidation of last 12 trading sessions and extended its gains towards 25,700 levels. The index closed 201.60 points higher at 25,589.65.

“The index formed a bullish candle on daily scale and holding above 25,650 zones could confirm its short term positive momentum,” Taparia said.

Now it has to hold above 25,500 zones to witness an up move towards 25,650 then 26,000 zones while on the downside support is seen at 25,250 then 25,000 level, he added.

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