Technical View: Nifty forms a bearish candle; 9,920 crucial for bulls

The Nifty which opened with a gap on the higher side in morning trade on Friday failed to hold on to momentum and closed below its crucial support level of 9,800 ahead of the long weekend. The index made a small bearish candle on the daily candlestick charts.

The bulls tried to push the index beyond 9,850 but witnessed selling pressure near its 5-days exponential moving average (DEMA) placed at 9,827.

The index has to continue to hold above 9,777 to witness any upmove towards 9850 and 9,928. The level of 9,920 which was the intraday high in Wednesday’s trade will act as a crucial resistance level for the index in the short term.

The index opened at 9814 and rose to an intraday high of 9,854. But, bears took control of D-Street and pushed the index below the support level of 9,800 to 9,775.35 which was its intraday low. The index closed 19.65 points higher at 9,788.60.

“The index closed with the gains of only 20 points and formed a small bearish candle and wiped out the hope for a smart bounce back move,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It has to continue to hold above 9,777 zones to witness an up move towards 9,850 and 9,928 while on the downside supports are seen at 9,720 then 9,685,” he said.

India VIX fell down by 5.20 percent at 12.48 and VIX has to cool down below 12.50-12 zones to witness the short term stability from its negativity.

On the options front, maximum Put OI was seen at strike prices 9,700 while maximum Call OI was seen at 10,000 strikes.

Option data suggests that 9700 is an immediate support while intact Call writing at higher strike would continue to restrict its upside momentum.

“The Nifty50 registered shooting star kind of formation after retracing 62% of its fall from 9921 – 9685 levels as this price behaviour is more or less in line with common market psychology as participants will naturally don't prefer to hold on to their positions especially in uncertain times when intermediate top is in place,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Either the rally was utilised to exit the stuck up positions or to create fresh shorts. Wednesday’s top of 9921 is going to cap the upsides for time being as this was the first pullback attempt which heavily sold off,” he said.

Mohammad is of the view that unless this high is taken off the threat of 9685 being broken will continue to loom large on the market participants.