Technical View: Nifty forms a bearish candle; 9,948 crucial for momentum to continue

The Nifty50 which opened with a slight gap on the upside failed to hold on to gains as the index witnessed selling pressure post opening which made a bearish candle for the third time this week.

The index closed well above its crucial psychological support level of 50-days exponential moving averages (DEMA), but around its 13-DEMA which is placed around 9,860.

Market participants preferred to remain on the sidelines ahead of the long weekend.

The market will remain shut on Friday on account of a public holiday while global markets will remain open.

The Nifty index opened positive but failed to hold above 9,880 and remained in a small trading range of 30 points for the entire trading session. For the bulls to remain in command, the index has to close above 9,948 for the momentum to strengthen.

In Thursday's price action, Nifty50 opened at 9881.20 which was slightly below its intraday high of 9881.50. The index finally closed 4.5 points higher from its previous close at 9857.05.

“Nifty50 witnessed an extremely rangebound session of 32 points as markets headed for a long week end suggesting traders may not like to carry unwanted risk in the truncated week,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, unless Nifty50 registers a breakout above 9,948 levels momentum may not gather pace once again. On the downside, traders are advised to watch the levels of 9740 below which selling shall ideally resume,” he said.

Mohammad further added that longs if any from a trading point of view should be cut if the said level of 9740 is violated.

On weekly basis, the Nifty index closed on a flat to positive note with the marginal gains of 0.20 percent and formed a ‘Long Legged Doji’ candle which also resembles a Dragon Fly Doji kind of pattern.

On the options front, maximum Put OI was seen at strike prices 9,800 followed by 9,500 and 9,700 while maximum Call OI was seen at 10,000 followed by 10,100 and 9900 strikes.

“We have seen fresh Put writing at all the strikes from 9500 to 9900 while Call writing was seen at 9,850 and 10,000 strikes. On the technical chart, Nifty formed a small bodied candle but was holding above previous day’s close of 9,850 zones,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index has been making higher lows from last three trading sessions and now it has to continue to hold above 9,820 to witness an up move towards 9,928-9,950. On the downside multiple supports are seen at 9,775 and 9,750 to hold the recent pull back move in the market,” he said.