Technical View | Nifty forms bullish candle, 17,800 is the level to watch


The Nifty extended gains for yet another session and closed 50 points higher at 17,787 on October 28, supported by auto and oil & gas stocks but selling in banks, metal, technology, and pharma stocks limited upside

The index formed a small-bodied bullish candlestick on the daily charts but failed to hold the crucial 17,800 mark amid volatility.

The 50-share index faced resistance at 17,800 throughout the week and could not stay above it. A close above it will help the Nifty hit 18,000, with support at 17,600-17,500 levels, experts said.

“The Nifty has been trading near the 78.6 percent retracement of the entire September decline throughout the last week. The key Fibonacci level is near 17,800. On Friday, the index attempted to stretch beyond this level on an intraday basis however couldn’t sustain in the higher territory,” Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas said.

The hourly chart shows that the index is in the process of forming a distribution near this key hurdle. The hourly momentum indicator has developed a negative divergence, which is a sign of exhaustion.

The overall structure shows that the next move down could be around the corner. Immediate support is at 17,720-17,700. Once that is breached, the index can slip to 17,500 in the short term, the market expert said.

On the weekly scale, too, the index formed a small-bodied bullish candle as it gained 1.2 percent during the week.

The broader market was under pressure on the first day of the November series. The Nifty midcap 100 index slipped half a percent and smallcap 100 index declined a percent on weak breadth. About two shares declined for every rising share on the NSE.

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The fall in volatility also boosted sentiment. India VIX, which indicates volatility expected over the next 30 days, dropped 4 percent to 15.92 levels.

On the options front, the maximum Call open interest at 18,500 strike followed by 18,000 and 17,800 strikes, with Call writing at 18,500 strike then 17,800 strike, while the maximum Put open interest was seen at 17,000 strike, followed by 17,500 and 16,500 strikes, with writing at 17,500 strike then 17,000 strike.

The data suggests that in the near term the Nifty could trade in the 17,500-18,000 range.

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Banking index

The Bank Nifty opened moderately lower at 41,237 and immediately rebounded to hit the day’s high of 41,482. The banking index, however, wiped the gains and closed 308 points lower at 40,991.

“The Bank Nifty index faced resistance at 41,500 where the highest amount of open interest is built-up. The index will remain volatile ahead of the RBI policy lined up next week,” Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities said.

The index is stuck in the 40,500-41,500 range and a break on either side will see trending moves in one direction, he added.

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