Technical View: Nifty ends lower but forms bullish candle; volatility to continue

January 08
18:29 2020

The Nifty50 recovered from its day’s low in afternoon trade and closed with a marginal loss amid volatility on January 8. The fear of possible escalation in geopolitical tension between the US and Iran, after Iran fired missiles on US troops at Iraqi facilities, triggered a 123 -points fall in the index in morning.

The index managed to defend the 12,000-mark and formed a large bullish candle on the daily charts as closing was much higher than the opening tick.

Experts feel volatility is expected to continue in the coming days and 50-DEMA (11,982) which was defended consistently this week would be crucial level for further direction on either side.

The Nifty50 opened sharply lower at 11,939.10 and hit an intraday low of 11,929.60 in the morning, but it gradually started recovery in afternoon and went closer to previous closing level, at 12,044.95. The index finally settled at 12,025.40, down 27.60 points.

“In the near term, markets may continue to remain volatile owing to Middle East related tensions. Technically speaking, even in the next trading session if Nifty sustains above its 50-day EMA (11982) then the possibility of short term trend turning sideways with positive bias will remain higher,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

In such a scenario Nifty may remain in a range of 12,190–11,920 for couple of trading sessions before witnessing a breakout in either of the directions, he said.

While strength shall not be expected unless it closes above 12,190 levels whereas weakness shall resume on a close below 11,929 with initial targets of 11,800, he added.

For the time being, considering the volatile news flows, Mazhar Mohammad advised traders to remain neutral for the day.

On options front, maximum Put open interest was at 12,000 followed by 11,500 strike, while maximum Call open interest was at 12,500 followed by 12,300 strike. Marginal Call writing was seen at 12,000 followed by 12,200 strike while Put Unwinding was seen at all the immediate strikes with minor Put writing at 11,800 strike.

Above mentioned Option data indicated that the Nifty could be in a trading range of 11,800-12,300 levels.

India VIX moved up sharply by 7.05 percent to 15.64 levels.

“India VIX bottomed out at 10-11 levels and sustaining around 14-15 levels. Thus, we may see continuation in a volatile move in coming days too,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Bank Nifty opened gap down and breached its previous swing low of 30,996 levels. However it managed to recover from lower levels and started moving higher from its crucial support of 30,800-30,900 levels.

The index formed a green body candle on daily scale as it recovered its losses from lower zones and ended on a flattish note, down 0.08 percent at 31,373.70.

“It continued to make lower highs for fourth consecutive session, however till the time it holds above 30,800-30,900 levels it could witness a bounce towards 31,600 then 31,900 levels,” Chandan Taparia said.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

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