Moneycontrol
Dec 06, 2017 04:34 PM IST | Source: Moneycontrol.com

Technical View: Nifty forms a bearish candle; crucial support stands @ 10030

Formation of a bearish candle after a Doji pattern clearly gives an advantage to the bears but a small technical bounce back could be on cards as Indian markets are trading near key support levels after 7 straight sessions of bearish candles.

Kshitij Anand @kshanand

The Nifty, which was reeling under pressure, extended the decline soon after the Reserve Bank of India (RBI) kept its key lending rate—the repo rate—unchanged at 6 percent, but warned about lurking inflation worries in the New Year.

The index formed a bearish candle on Wednesday and breached its 100-days simple moving average placed at 10,071. The index took support at its 100-days exponential moving average placed around 10,038 which also forms a crucial support in days to come.

Formation of a bearish candle after a Doji pattern clearly gives an advantage to the bears but a small technical bounce back could be on cards as Indian markets are trading near key support levels after 7 straight sessions of bearish candles.

Both MACD as well as Supertrend indicators are in ‘sell’ mode and if Nifty breaks below 10,030 then decline towards 9850 is possible, suggest experts.

The Nifty opened at 10,088 and rose to an intraday high of 10104 but then bears took control of the index and pushed the index below 1oo-SMA to touch its intraday low of 10,033. Nifty finally closed 74 points lower at 10,044.

“The Nifty continued its slide before registering a bearish candle as selling got accelerated especially after RBI policy meets,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, as pointed out in our last update, in these columns, crucial support of 10030 is still intact and as long as that support doesn’t get breached on the closing basis a window of opportunity shall remain open for bulls to make a comeback,” he said.

Mohammad further added that a relief rally and a confirmation in that regard shall come if Nifty closes above 10050 in immediate trading session. Contrary to this any breach of said support level shall initially drag down the indices towards 9850 levels.

The Nifty breached its crucial 100-days moving average after 2 months as selling pressure weighs on investor sentiments after RBI maintained the status quo.

The Nifty continued the selling spree for the 7th consecutive session in a row. The index also closed below 10100 which was being sustained in last three days.

“Initial supports which were last hope for bulls placed at 10100 - 10090 levels has also been breached coupled with 10071 which was 100 Days SMA. In a continuous downward trend, we are seeing selling pressure on any marginal bounce and is being aggressively utilized by bulls,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.

“In the short-term, a bounce towards 10200 - 10180 is being observed as resistance while support may be seen at 9980 - 9950. Technically price structure also suggests a bearish sentiment is prevailing with a recent low around 10030 being a lower bottom,” he said.

Mustafa further added that a breach of previous swing low which was formed in November around 10100 may also act as a resistance.

On the options front, maximum open interest stands at 10,000 while maximum Call OI stands at 10500 followed by 10400 strikes. Maximum Put OI at 10000 strikes could provide an immediate support but if that is not respected then fresh decline could start in the market led by Call unwinding.

India VIX moved up by 0.52 percent at 15.08. Rising volatility is giving the grip to bears and showing short-term concern for a long position.

"We have seen fresh Call and Put writing at most of the “out of money” strikes suggests that supports and resistances are gradually shifting lower," Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

"Technically, Nifty failed to hold 10094 zones and formed a Bearish candle on the Daily scale. Till it holds below 10094 zones, weakness could continue towards next support of 10000-9980 while on the upside hurdles are seen at 10118 then 10150 levels," he said.
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