Technical View: Nifty forms small bodied candle; can go long with a stop at 9,861 levels
A move below Wednesday’s low in the week could lead to further selling pressure while a break above 9,988 could take the index towards 10,040, say experts.
The Nifty recouped most of its intraday gains and closed above its crucial support level of 9,900 on Wednesday but made a small bodied candle on the daily candlestick charts which represent indecisiveness among the bulls as well as bears.
It was another day of listless trading session on bourses as Nifty consolidated in a narrow range of around 30-50 points as bulls and bears both hold their line in the sand amid rising geopolitical tension between North Korea, US, and its allies.
The Nifty which opened with a big gap on the lower side at 9,899 slipped further to hit its intraday low of 9,882 but then bulls managed to pull the index higher before closing the day 36 points lower at 9,916.
The index bounced back from its crucial support placed at 20-days exponential moving average (DEMA) 9,893 and a move below Wednesday’s low in the week could lead to further selling pressure while a break above 9,988 could take the index towards 10,040, say experts.
“The Nifty moved in a narrow range which suggests that markets in near term remain directionless. The price range of last two trading sessions is curtailed inside the range of 9988 – 9861 registered by Monday’s bearish candle formation,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Hence, in the near term prices can be expected to move swiftly in the direction of the breakout. Hence, a breach of 9,861 shall accelerate selling pressure towards 9,700 whereas breach of 9,988 may kick the indices towards critical resistance point of 10,040,” he said.
Mohammad further added that traders will be better off by focusing on stock specific opportunities by placing a market stop below 9,861 levels.
On the options front, maximum Put OI was seen at 9,700 followed by 9,800 and 9900 strikes while maximum Call OI was seen at 10,000 followed by 10,100 and 10,200 strikes.
Fresh Put writing was seen at strike prices 9,600, 9700 and 9,800 while Call writing is taking place 9900 and 10,400 strikes. Call Unwinding was seen at strike prices 10,100, followed by 10,200, 10,300, and 10,500.
India's Volatility Index (VIX), a measure of market’s expectation of volatility over the near term rose 1.9 percent to 13.13 from its previous close of 12.88 levels.
The index struggled in a tight range for the second consecutive day in a row as global cues await developments over international geopolitical developments.
“The Nifty made a small candlestick pattern on the daily chart which is still in the range of Monday. A small candlestick pattern can also mean indecisiveness for investors in near term,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.“The bulls have very strong hold in present structure at 9870 - 9850 level while bears have a strong hold of 9970. It is a matter of few days when we see a breakout of above-mentioned range in decisive way and market may trend,” he said.