Technical View: Nifty forms #39;Hammer#39; like pattern ahead of FO expiry; 10,100 crucial for bulls

October 24
17:29 2018

Bulls managed to take charge at Dalal Street after intraday tussle with bears on Wednesday. The Nifty50 after strong gap up opening traded volatile as the day progressed, followed by marginal correction in afternoon. However, it managed to recoup losses in late trade.

The index closed volatile session sharply higher ahead of expiry of October derivative contracts tomorrow, and formed small bearish candle, which resembles a ‘Hammer’ like pattern on the daily charts.

The index managed to hold its near term support levels of 10,100, which indicated that it can go up further on expiry day, experts said.

The Nifty50 opened 131 points higher at 10,278.15 and touched an intraday high of 10,290.65 in early trade, but turned volatile as the day progressed and corrected sharply towards 10,126 levels, the day’s low. However it recovered well by nearly 100 points from its intraday low and formed a Hammer candle followed by a Doji on daily scale. The index closed 78 points higher at 10,224.80.

“Nifty50 registered a Hammer formation after Tuesday’s Doji suggesting that bulls are trying hard to form a short term bottom around recent lows of 10,100 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said though there are no apparent buy signals on short term charts, intraday price behaviour of last two sessions is suggesting that near term trend is slowly tilting in favour of bulls as bears were unable to capitalise on intraday falls and push the indices to much lower levels beyond 10,100, he said.

Hence, he feels on expiry day if Nifty still sustains above 10,100 levels then it can act as a base from where it can stage a pull back rally towards 10,436 levels in the near term.

Mazhar said further strength in Nifty shall be expected only on a close above 10,450 levels which then shall open up a new target towards 10,710 kind of levels. Contrary to this breach 10,100 shall initially lead to the test of 9,950, he added.

India VIX fell by 2.65 percent to 18.53. However VIX has to go down below 17-16 zones to rescue the bulls after the sharp cut of last two months.

On option front, maximum Put OI was at 10,000 followed by 10,200 strike while Call OI congestion was seen at 10,300 followed by 10,400 strikes. Call writing was seen at 10,300 followed by 10,250 strike while Put writing was seen at 10,000 followed by 10,200 strike. Option band signifies an immediate trading range between 10,138 to 10,333 zones.

“Index is witnessing tug of war between bulls and bears near to major juncture of 10,200 zones. Now it has to hold above 10,200 zones with a follow up buying interest to head towards 10,280 then 10,333-10,350 zones while on the downside supports are seen at 10,138 then 10,100 levels,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Bank Nifty opened positive but failed to hold above 25,350 zones and remained consolidative with the downside support of 24,800-24,750 zones. It closed higher than the previous day’s close but lower than its opening levels which indicates that bulls and bear both are fighting hard near to 25,000 zones. The index closed 91.75 points higher at 25,064.20.

“Now it has to hold above 25,000 zones to witness an up move towards 25,250 then 25,350-25,400 zones while on the downside supports are seen at 24,850 then 24,750-24,650 zones,” Taparia said.

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