Technical View: Nifty creates history, forms bullish candle on charts

The Nifty50 which opened with a gap on the higher side on Monday created history in opening tick as the index surpassed its previous record high of 10,137.

The index witnessed sustained buying interest from bulls throughout the trading session which took the index to its fresh all-time high of 10,171.70 and made a bullish candle on the daily candlestick charts.

The Nifty50 index opened positive and made a new record life-time high of 10,171. It surpassed previous lifetime high of 10138 and registered a highest daily close above 10,150.

The volatility has also come down which is supporting the upside in the market. India VIX fell down by 2.03 percent at 11.44 and lower volatility is supporting the bullish bias of the market.

It was a display of strength from the bulls as all cylinders of the market fired at the same time. The rally was broad-based as smallcap index hits fresh record highs and the midcap index came within kissing distance of hitting fresh record highs.

The next important question in front of traders is – will the rally continue? Well, as long as Nifty trades above 10,137-10,171, the bulls will keep their hold on D-Street. However, a slip below 10,043 could be seen as the first sign of weakness.

If the Nifty consistently trades above 10,137 -10,171, the rally is likely to stretch towards 10,300 to 10,400. Investors are advised to keep a trailing stop loss below 10,043 for all long positions, suggest experts.

“Bulls continued with their saga of hitting new lifetime highs as Nifty50 witnessed a small bull candle after a gap-up opening. However, in the larger scheme of things this rally is only heading towards making a top before unleashing a bigger correction,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

However, at this point in time, short term charts are not displaying any weakness and the trade can be on the long side for time being till signs of reversal are visible.

“In the immediate short-term, as long as Nifty trades above 10,171, momentum is likely to continue which may raise the chances of bigger targets close to 10450 kinds of levels and breach 10043 can be an initial sign of weakness,” said Mohammad.

He further added that it will be prudent on the part of traders to maintain a stop below 10,043 levels and trim their existing longs as we proceed into temporary strength.

On the options front, maximum Put OI shifted from 9,900 to 10,000 strike while maximum Call OI is at 10,200 and 10,100 strikes.

Significant Put writing was seen at strike prices 10,150 and 10,200 which indicates that index could continue to remain in new high territory while intact Call writing at 10200 is giving a small pause for further upside momentum, say experts.

“It formed a Bullish candle with a gap away pattern which indicates that bulls have jumped the supply zone,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index has to continue to hold above 10,138 to extend its move towards 10,200 then 10,270 zones while on the downside supports are seen at 10,050 and 10,020 zones,” he said.