Technical View: Nifty forms a bull candle, move above 50-DMA; 9,800 important for bulls

The Nifty50 which opened with a small gap on the upside reclaimed its crucial 50-days exponential moving average (DEMA) placed at 9,781 on Monday and made a bullish candle on the daily candlestick charts.

A bullish candle formed on the daily chart today signifies that the market witnessed sustained buying interest from the Bulls for the most part of the trading day which is a bullish sign after a fall of 3.5 percent seen last week.

Bulls snapped 5-day losing streak and it is all the more important for the index to hold above 9,800 on a sustainable basis to head towards its next crucial target of 9860-9880.

The Nifty index opened positive and negated its formation of lower highs – lower lows of the last four trading sessions. It witnessed a bounce back move after the sharp decline of the last week.

The Nifty50 opened at 9755.10 and then slipped marginally to touch its intraday low of 9,752.10. It rose to an intraday high of 9818.30 before closing the day 83 points higher at 9,794.15.

Albeit Nifty50 marginally closed above its 50-days EMA with decent gains this kind of pull back was pretty much on the cards after the vertical fall of around 4 percent in 5 sessions.

“The real test for bulls lies in holding Monday’s gains and if it consistently manages to sustain above 9800 levels then there will be some hope of bottoming out around 9700 levels,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“On the downside, if 9,752 is broken in next trading session then long side traders need to be on alert where as a close below 9700 shall resume the downtrend with targets placed around 9,400,” he said.

On the options front, maximum Put OI was seen at strike prices 9,500 followed by 9,800 while maximum Call OI is at 10000 followed by 10100 strikes.

Fresh Put writing was seen at strike prices 9500, 9700 and 9800 while marginal Call unwinding was seen in strike prices 9800, 9850 and 9900.

“Put writing indicates that now immediate swing lows are going to be held while no major change in Call OI suggests a range bound movement. On the technical front, it formed a bullish candle on the daily chart and managed to move back near to its 50-DEMA,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index has to continue to hold above 9775 zones to witness an up move towards 9860-9880 zones which is the 38.20% retracement of its recent fall from 10138 to 9685 levels. On the downside it has support at 9750 and 9710 levels to hold the recent pull back rally,” he said.