Aug 10, 2017 06:14 PM IST | Source:

Technical View: Nifty forms a bearish candle; Supertrend indicators gives a sell signal

On the options front, maximum Put OI was seen at strike prices 9,800 followed by 9,900 while maximum Call OI was seen at strike prices 10,100 followed by 10,000.

Kshitij Anand @kshanand

The Nifty50 which started with a gap on the lower side went on to test its crucial support placed at 50-days exponential moving average (DEMA) from where it bounced back to close above 9800 on Thursday.

The index formed a bearish candle for the fourth consecutive day in a row and a convincing breach of 50-DMA in the next few sessions could lead to further downside in the markets.

The Nifty50 opened at 9,872.85 and rose marginally to 9,892.65 but then bears took control of D-Street which pushed the index below its 50-DMA placed at 9,782. The index bounced back from its intraday low before closing 87 points lower at 9,820.

The last minute pull back from crucial support levels suggest that bulls have not given hope on D-Street yet and are eager to bounce back. If global cues remain stable, we could see a slight technical bounce back on Friday.

However, bullish momentum will continue once Nifty reclaims Mount 10K. On the other hand, a fall below 9,725 could open doors for another 300 point fall. Trade with caution and strict stop losses.

One factor which might work against bulls is a ‘SELL’ signal triggered by the Superternd indicator today. Moving average convergence divergence (MACD) which is a trend following momentum indicator gave a sell signal earlier in the week on Monday.

The last time Supertrend indicator gave a SELL signal was in September 2016 when the index was trading around 8800. The index fell nearly 1200 points before the signal reversed its trend and that was in December 2016.

“Bears were on rampage as Nifty50 corrected around 100 points but soon bulls regained their strength as they successfully defended the 50-days moving average and appears to have saved the day for themselves as they managed to push the prices higher from day’s low,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“As Bank Nifty also recoiled from critical support levels a pullback in next trading session can’t be ruled out in the market. However, major technical set back is likely to develop if Nifty50 closes below 9725 levels in next trading which may open up the doors for another 300 point fall,” he said.

Mohammad further added that it is inevitable for bulls to sustain above 50-days SMA on closing basis.

On the options front, maximum Put OI was seen at strike prices 9,800 followed by 9,900 while maximum Call OI was seen at strike prices 10,100 followed by 10,000.

Fresh Call writing at 9900 and 10000 strikes while Put unwinding was seen at 10,000 strikes. Option data suggests the shift of trading range on lower levels but intact Put OI at 9800 strikes is respecting to its recent swing lows, suggest experts.

The index has been making lower highs – lower lows on the daily chart and corrected by around 360 points from its life time high of 10137 to 9776 in last seven trading sessions.

“Till index does not negate the formation of lower top – lower bottom, short term weakness could prevail in the market. Traders are suggested to take calculated risk till Nifty index doesn’t cross and hold above 9928-9950 zones,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty is down by 2.45 percent in this week and formed a strong Bearish candle on the weekly chart by combining the price behaviour of last four sessions,” he said.

Taparia further added that till it remains below 9,880 zones, the index can drift towards its 50- DEMA support of 9,770 then 9,710 zones while on the upside hurdles are seen at 9,928-9,950 zones.
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