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Jan 03, 2018 04:37 PM IST | Source:

Technical View: Nifty forms small bodied candle; strong support placed at 10,400

The index has a strong support around 10,400 and if Nifty fails to hold this level in January series, the momentum could tilt towards bears, suggest experts.

Kshitij Anand @kshanand

The Nifty50 index consolidated for the second day in a row on Wednesday and formed a ‘small bodied’ candle on the daily candlestick charts. The index failed to hold above 10,500 for the third consecutive day in a row.

The index slipped below its 5-days exponential moving average (DEMA) but found support near 13-DEMA placed around 10,400. Analyst advises investors to either wait for a breakout or a breakdown before initiating fresh positions.

The index has a strong support around 10,400 and if Nifty fails to hold this level in January series, the momentum could tilt towards bears, suggest experts.

The index which opened at 10,482 rose to an intraday high of 10,503. It slipped towards its crucial support of 10,400 to record its intraday low of 10,429. It finally closed 1 point higher at 10,443.

“The Nifty50 witnessed a range bound move of around 70 points before signing off the day almost at the point where it closed in Tuesday’s session. However, in a sense this itself can be construed as slightly advantageous to the bulls as follow up selling to Monday’s consolidation breakdown down is missing suggesting that bulls for time being successfully managed to absorb the selling pressure after the said breakdown,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

“Hence, as long as they sustain above the psychologically important support point of 10400 levels they can make an attempt to challenge 10550 levels once again. Unless this point is conquered they will not succeed in gaining upper hand over the market again,” he said.

Mohammad further added that if 10400 is broken down then bears will drag down the indices towards their initial target of 10250 levels. Traders are advised to remain cautious and avoid fresh longs on a breakdown below 10400 levels, he said.

India VIX fell down by 0.42 percent at 13.62. VIX has to hold below 13-12.50 zones to support the overall Bullish bias of the market.

On the options front, maximum Put open interest is at 10300 followed 10000 strikes while maximum Call OI is at 11000 followed by 10600 strikes.

Fresh Call writing at all the strikes from 10400 to 10600 while Put writing was seen at 10300, 10400 and 10500 strikes.

“Option band signifies a broader trading band in between 10350 to 10550 for next coming sessions. The Nifty failed to hold above 10500 and slipped towards 10430 mark but finally closed on a flattish note,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index formed a narrow range candle and requires a decisive move to get the next leg of the rally. Nifty has to hold above 10450 zones to witness an up move towards 10500 then 10550 while on the downside supports are seen at 10400 levels,” he said.
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