Technical View: Nifty forms bearish candle for 8th day; 11,250 crucial

May 10
17:29 2019

Indian market bounced back from its 100-days exponential moving average (EMA) for the second consecutive day in a row on Friday but failed to reverse losses and closed with a bearish candle on the daily charts for the 8th consecutive day in a row.

The Nifty50 for the week closed 3.7 percent lower. The broader market outperformed as the Nifty Midcap index gained 0.47 percent while the Nifty Smallcap index rose 0.57 percent.

The index consolidated for the second consecutive day in a row near its 100-days EMA. Going forward, 11,250 will be important for bulls if they have to regain control of D-Street. A break below this level could take the index towards 200-DMA placed at 11,020 levels, suggest experts.

The Nifty50 which opened at 11,314 rose to an intraday high of 11,345 before bears took control and pushed the index below 11,300 levels for the first time since March 2019. The index touched an intraday low of 11,251 before closing the day at 11,278 – down 22 points.

“Albeit Nifty50 closed below 11,300 levels, it appears to be making an attempt to consolidate around 11,250 levels as it registered a bearish candle on the daily charts whereas a robust bear candle was witnessed on the weekly charts suggesting that trend may be slowly tilting in favour of bears,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“In the near term, sustaining above 11,250 levels looks key for bulls to prevent further damage. On sustaining above 11,250 levels, Nifty can bounce up to 11,400 kind of levels and in such scenario, a range-bound market between 11,450 – 11,250 can be witnessed,” he said.

He further added that if the level of 11,229 gets breached on a closing basis, the index will head towards its 200-day moving average whose value is placed around 11,020 kind of levels.

India VIX moved up by 3.36 percent to 26.33 levels. However, higher VIX suggests that volatile swings could continue in the market ahead of election polls and outcome.

On the options front, maximum Put OI is placed at 11,000 followed by 11,500 strikes while maximum Call OI is seen at 12,000 followed by 12,500 strikes.

Call writing is seen at 12,000 followed by 11,800 strikes while Put writing is seen at 11,300 followed by 11,500 strikes. Options band signifies a shift in a lower trading range of 11200 to 11700.

“The Nifty index continued its weakness for the eighth consecutive trading session as every bounce was being sold in the market. It formed a Bearish Candle on daily as well as on the weekly charts which implies that bears are continuously putting pressure at higher levels,” Chandan Taparia, derivative & technical analyst at Motilal Oswal Securities told Moneycontrol.

“It is forming lower highs-lower lows from past five trading sessions and holding below its 50-DEMA which indicates weakness. Now till it remains below 11,350 zones, weakness could continue towards 11,188 then 11,050 zones while on the upside hurdle is seen at 11,333 then 11,420 zones,” he said.

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