Moneycontrol
May 18, 2017 04:51 PM IST | Source: Moneycontrol.com

Tech View: Nifty forms bearish candle; exit longs on pullback rallies

There could be a small pullback which should be used by investors to exit long positions. The bullish momentum will resume if Nifty manages to break above 9,480-9,532 levels.

The Nifty reversed gains from record highs on Thursday as bears regained command of D-Street after a gap-down opening. The index bounced back from its 10-days exponential moving average placed at 9,418 but still made a bearish candle as closing was lower than the opening level.

The index made a bearish candle after a 'hanging man' kind of formation in the previous trading session. The index closed below Wednesday’s intraday low of 9,486.10 which hints at further correction, suggest experts.

There could be a small pullback which should be used by investors to exit long positions. The bullish momentum will resume if Nifty manages to break above 9,480-9,532 levels.

The Nifty index opened at 9,453.20 and rose to an intraday high of 9,489.10 which made a small upper shadow. It slipped over 70 points to hit its intraday low of 9,418 before closing at 9,429.45, down 96 points.

“The Nifty appears to have reversed its uptrend and looks that it has embarked on a southern journey as it breached confluence of critical short-term supports available around 9,450 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Besides our twin momentum oscillators which have higher accuracy in catching short-term turning points generated sell signal suggesting that this corrective swing will continue for another couple of trading sessions,” he said.

Mohammad further added that if Nifty closes below 9,400 levels in immediate trading session then eventually recent top of 9,532 has the potentiality of shaping up as a multi-week or multi-month top going ahead. “Hence, if there is going to be any pull back in immediate trading session that should be used by traders to exit their long positions,” he said.

chart18052017

On the options front, maximum Put OI was seen at strike prices 9,300 followed by 9,400 while maximum Call OI was seen at strike prices 9,500 followed by 9,600.

Fresh Call writing was seen at strike prices 9,500 which is restricting its upside momentum while Put unwinding in all the strikes from 9,600 to 9,300 are dragging its support to lower levels.

The Nifty index opened negative and fell down by more than 100 points towards its crucial 10-days exponential moving average (DEMA) placed at 9,419.

“The Nifty formed a Bearish candle similar to a “Shooting Star” followed by a reversal hanging man pattern on the daily chart. It has broken its immediate support trendline by connecting the lows of 9088, 9272, 9307, 9336 and 9372,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“If the index sustains below 9,450 then selling pressure could drag the index towards 9,380 and 9,350 while on the upside immediate hurdle exists at 9480 to nullify the effect of recent declines,” he said.
Sections
Follow us on
Available On