Technical View: Nifty forms bearish candle amid consolidation; be neutral till index crosses 10,290

October 30
17:29 2018

The market reversed some previous day’s gains amid consolidation on Tuesday, which indicated that traders may have preferred to take some money off the table. The Nifty50 after a weak start consolidated for major part of the session and breached 10,200 levels in the late trade.

Sharp selling in oil marketing companies, banking & financials and index heavyweight Reliance Industries dented sentiment.

The Nifty50 closed tad below 10,200 levels and formed small bearish candle on the daily charts.

Experts advised to stay neutral on the market for the time being unless it decisively crosses 10,290 levels.

The Nifty50 after a negative start managed to show some recovery in first hour of trade itself and hit an intraday high of 10,285.10, but wiped out those gains in late morning deals and gradually extended losses to hit day’s low of 10,175.35 in late trade. The index closed 52.50 points lower at 10,198.40.

“Albeit Tuesday’s move with a small bearish candle is more looking like a day of consolidation on the bourses, lack of follow through buying to Monday’s strong upmove, is certainly a cause of concern,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said hence, in next couple of days Nifty50 needs to clear and sustains above 10,290 levels to pickup momentum once again. “In that scenario targets towards 10,450 can be expected whereas on the downsides critical support appears to be placed around 10,100 levels below which recent lows of 10,004 will come under threat.

He advised traders to maintain a neutral stance on index for time being unless it decisively get past 10,290 levels.

India VIX moved up by 3.27 percent to 20.47 levels. VIX has to go down below 17-16 zones to confirm the short term reversal and a decent bounce back after the sharp cut of last two months, experts said.

On option front, maximum Put open interest (OI) was seen at 10,000 followed by 10,200 and 9,500 strikes while maximum Call OI was seen at 11,000 followed by 10,500 strikes. Put writing was seen at 10,200 followed by 10,000 strike while Call writing was seen at 10,300 followed by 10,500 strike.

“The Nifty formed a small Spinning candle and remained consolidative with the limited upside for most part of the session. Recently it has taken support near to psychological 10,000 zones and seen a positive divergence with Mechanical indicators and turning from its deep oversold territory,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

He further said now the index has to continue to hold above 10,180-10,200 zones to extend its move towards 10,280 then 10,333 levels while on the downside support exists at 10,138 then 10,080 levels.

Bank Nifty opened flattish but failed to hold above 25,000 zones and drifted towards 24,700 zones. It failed to continue its momentum of last session and remained negative to range for most part of the session. The index closed 151.95 points lower at 24,807.75.

Now the index has to continue to hold above 24,650 to extend its gains towards 25,250 then 25,500 levels while on the downside major support is seen at 24,500 zones, Taparia said.

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