The Nifty traded in a volatile range throughout the day on Thursday, but bulls managed to regain control over D-Street after seven straight sessions of decline. The index made a bullish candle which closely resembles ‘hammer’ like pattern on charts, after forming 7 consecutive bearish candles on daily charts.
The index bounced back from its crucial support placed at 100-day exponential moving average (DEMA) placed at 9714 for second consecutive day in a row and as long as it trades above 9685 chances of a bounce towards 9,920 is possible.
The trend reversal will be much stronger if the index decisively closes above 9,920. However, a breach of 9685 on closing basis could again fuel bearish sentiments which could push the index back towards 9638-9600 levels.
A perfect ‘Hammer’ pattern is formed when the index trades significantly lower than its opening price for the most part of the trading day but manages to recoup losses and close either above or lower than its opening price.
The Nifty index opened at 9,736.40 and rose to an intraday high of 9789.20 and retraced over 100 points to touch its intraday low of 9687.55. It bounced back from its 10-days EMA to close 33 points higher at 9,768.95.
“The Nifty staged a smart rally from the right technical point of 9685 and registered Hammer formation on the charts. Interestingly, the support from 9685 also looking like a possible double bottom provided index doesn’t violate this point going forward,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“However, it will be too early to conclude that bottom is in place. Nevertheless sustaining above 9685 levels one can remain positive for targets placed around 9900 kinds of levels and prospects for trend reversal will become stronger if indices trade above 9920 on a closing basis. On the other hand breach of 9685 shall resume the downtrend,” he said.
The Nifty closed the series with the loss of 1.5 percent at 9768 while Bank Nifty closed the series with the loss of 1.3 percent at 24,008.
The Nifty future saw a rollover of 68 percent on a provisional basis with the roll cost 0.18 percent. While Bank Nifty has seen rollover of 62 percent on a provisional basis.
On the options front for the month of October, maximum Put OI was seen at strike price 9,700 followed by 9,500 while maximum Call OI was seen at 10,000 followed by 9,900 strikes.
“The OI concentration scattered at different strikes being the fresh contrast but option band signifies a trading range of 9650-9950 zones. Technically, Nifty formed a Hammer candle on the daily chart and closed positive after the seventh consecutive negative sessions,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.
“If the index manages to hold above 9750-9777 zones then short-term reversal could be seen for an up move towards 9880 and 9928 zones while below 9685 fresh weakness could intensify for the further declines,” he said.
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