Technical View: Nifty forms a bullish candle; keep a stop loss below 9,850

The Nifty50 which opened with a slight gap on the higher side rose above its crucial resistance level of 9900 on Wednesday but failed to close above its crucial level of 9920 levels. It made a bullish candle on the daily candlestick charts.

October series started on a bullish note as Nifty managed to close above its crucial resistance level of 9,900, led by gains in pharma, oil & gas, FMCG, and PSU banking stocks.

The index closed above its key short-term moving averages such as 5-days exponential moving average (DEMA), 10-DEMA, 50-DEMA, and 13-DEMA.

The Nifty index rose for the fourth consecutive day to an intraday high of 9,938. It has been making higher highs and higher lows from the last three trading sessions.

It has recovered by 50 percent of the entire fall from 10,178 to 9,687 and now the next hurdle is 61.80% retracement at 9,980-10,000 zones. Investors who have created long positions can keep a strict stop loss below 9850, suggest experts.

The Nifty50 which opened at 9884 rose to an intraday high of 9938. It slipped to an intraday low of 9850 before closing the day at 9914, up 55 points.

Despite no rate cut from the RBI, the positive reaction from the market participants should augur well for bulls going forward in consolidating their gains further towards 10,000 levels.

“Now a close above 9921 should provide a much-needed fillip to the bulls which should bring back momentum traders. However, continued underperformance from Bank Nifty can be a cause for concern as any sell-off from that index may put pressure on the broader markets,”
Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, traders are advised to hold on to their gains with a stop below 9850 levels and can even consider fresh longs above 9921 if the indices trade at that point at least for one hour, for a target placed in the zone of 9991 – 10,080,” he said.

India VIX fell down by 5.30 percent at 11.80 and falling volatility from last four sessions is supporting the buying interest.

On the options front, maximum Put OI shifted to 9800 followed by 9700 strikes while maximum Call OI is intact at 10000 strikes.

Fresh Put writing at 9900 and 9800 strikes while fresh Call writing is seen at 10050 and 10100 strikes.

“Option data suggests a shift of supports and resistances to higher levels which may extend its recent bounce back move,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The index has to continue to hold above 9850 to extend its up move towards 9980-10000 zones while on the downside supports are seen at 9820 and then towards 9777,” he said.