Tech View: Nifty forms bearish candle on charts; maintain long positions
A bearish candle is formed when the closing level is less than the opening level.
The Nifty, which started on a positive note, pared gains and turned negative in afternoon trade as bears tried to take control of D-Street from the bulls on Friday.
The only positive takeaway from the trading session is that the index did not close around its day’s low, which suggests buying interest at lower levels.
A bearish candle is formed when the closing level is less than the opening level. The Nifty opened at 9,179.10 and rose to an intraday high of 9,183.65 but bears pulled the index lower towards 9,088 which was Friday’s intraday low.
“Albeit Nifty witnessed selling pressure on an intraday basis, recovery in the latter part of trading sessions from intraday lows of 9088 is clearly suggesting consolidation phase is on but with a bullish bias,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told moneycontrol.
Bulls pushed the index above its crucial resistance level of 9,100 for a third consecutive session in a row but closed below its short term moving averages such as 5-days exponential moving average (DEMA), 10-DEMA, and 20-DEMA. The Nifty closed 17 points lower at 9,119.40.
“This price action resulted in bear candle which resembles a hammer kind of formation with a slightly visible lower shadow. If this recovery were to spill over to the next trading session then it can once again attempt a rally towards its critical resistance point of 9217 levels which need to be conquered on a closing basis to pick up momentum once again,” he said.
The Nifty closed in red in 4 out of 5 trading sessions this week which suggests consolidation and it looks like the index is gearing up for a big move.
The bias still remains on the upside as the index closed above its crucial resistance level of 9,100; however, if it closes below 9,000 next week, the bias might shift towards the downside, suggests experts.Mohammad is of the view that as long as Nifty sustains above 9,075 levels long positions can be considered. “Even if 9,075 level is broken in the near-term traders need not fear as one of the options available to a corrective structure is calling for a bottom close to 9,000 levels,” he said.