Moneycontrol
May 12, 2017 05:42 PM IST | Source: Moneycontrol.com

Tech View: Nifty forms bearish candle; do not go short on this market

One big positive takeaways from Friday’s session is the fact that bulls managed to push the index back above its crucial resistance level of 9,400, after hitting an intraday low of 9,372.55, which signifies buying at lower levels.

Tech View: Nifty forms bearish candle; do not go short on this market

Kshitij Anand

Moneycontrol News

The Nifty which started on a positive note failed to hold onto the momentum and witnessed profit booking decline but buying at lower levels pushed the index back above 9,400 levels on Friday. The index made a bearish candle on the daily charts.

A bearish candle is a continuation pattern and signifies that bears kept the selling pressure throughout the trading session and index closed below its opening level.

One big positive takeaways from Friday’s session is the fact that bulls managed to push the index back above its crucial resistance level of 9,400, after hitting an intraday low of 9,372.55, which signifies buying at lower levels.

The Nifty opened at 9,372.55 and rose to an intraday high of 9,437.75. It bounced back from its 5-days exponential moving average placed at 9,380 and finally closed 21.5 points lower at 9,400.90 which is a bullish sign for the index.

After farming a strong bull candle on Wednesday, index consolidated on Thursday Friday which could put doubt in investors mind about the strength of the rally. However, there are no immediate signs that the trend is reversing and investors should avoid shorting the index.

Investors who went long on the index should continue holding positions with a target price of 9,550 and tight stop loss below 9,330 on a closing basis.

“The Nifty appears to have drawn support from its 5-days exponential moving average (DEMA) and besides that, today’s low of 9,372 comes to 50% of the retracement of the last leg of rally from the lows of 9,272 to 9,450,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.com.

“Hence, traders should not get disheartened by these marginal corrections and adopt a bearish stance on the market, until Nifty50 breaches certain critical levels, but can continue to look for higher targets placed around 9,550 levels as formations on weekly charts are quite bullish,” he said,

Nifty registered a decent bull candle for the week, but Mohammad advises traders to remain cautious and place a tight stop below 9330 levels on closing basis as a breach of which shall trigger a short-term downtrend.

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On the options front, maximum Put OI was placed at strike price 9,300 followed by 9,200 while maximum Call OI was seen at strike price 9,500 followed by 9,400.

Fresh Call writing was seen at strike prices 9,400, 9,450 and 9,500 which is restricting its upside momentum while Put unwinding in 9500, 9400 and 9300 is giving a sign of a pause in positive momentum, suggest experts.

“The Nifty witnessed a recovery of 30 points from lower levels but formed a Bearish Candle on the daily chart and finally closed negative with the loss of around 20 points,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.com.

“It has to continue to hold above 9,380 zone to witness an up move towards 9,450 and 9,500 while on the downside a break below support zone could drag the index towards 9,320,” he said.
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