Moneycontrol
Last Updated : May 16, 2018 04:34 PM IST | Source: Moneycontrol.com

Technical View: Nifty forms a ‘High Wave’ pattern; 10,699 crucial level for Thursday

A High Wave kind of pattern is formed when there is a long upper shadow and a long lower shadow with a small body. The pattern is similar to a spinning top or a Doji kind of pattern but in the high wave, the shadows are longer and there is a small body.

Kshitij Anand @kshanand

Kshitij Anand

The Nifty50 witnessed another volatile day on Wednesday but managed to close above its crucial support level of 10,700 levels but witnessed an intraday volatility of 91 points which resulted in a ‘High Wave’ candlestick pattern on the daily charts.

A High Wave kind of pattern is formed when there is a long upper shadow and a long lower shadow with a small body. The pattern is similar to a spinning top or a Doji kind of pattern but in the high wave, the shadows are longer and there is a small body.

The Nifty50 which opened at 10,751.95 which rose to an intraday high of 10,790.45. But, bears took control of D-Street and pushed the index below 5-DEMA to touch its intraday low of 10,699. The index closed above its 13-DEMA at 10,741.95, down 60 points.

The Nifty50 has crucial support placed at 10,700 levels but a close below 10,699 levels which was Wednesday’s intraday low could well change the trend for the markets, suggest experts. On the contrary, a sustained closed above 10,800 could resume the uptrend for the Nifty50.

“The Nifty50 appears to have registered a ‘High Wave’ kind of candle formation as it witnessed an intraday swing of around 2 percent before signing off the session. In the near-term, indices may continue to remain uncertain and vulnerable to the political developments,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, based on larger trends it appears that Nifty50 is in a corrective and consolidation phase from the highs of 10,784 itself registered on 2nd of May which requires it to slip below 10,601 to culminate a corrective structure before resuming the uptrend. In such a scenario on the downsides it should bottom out between 10,601 – 10,552 levels,” he said.

Mohammad further added that the pressure on the indices can be expected to build further if it slips below 10,699 levels in next session. Contrary to this if the indices manage a sustainable close above 10,800 levels for a couple of trading sessions then retest of 10,929 can be expected.

India VIX moved up by 2.09% at 13.43 levels. On the options front, maximum Put OI is placed at 10,500 followed by 10,700 strikes while maximum Call OI is placed at 11,000 followed by 10,800 strikes.

Put unwinding was seen at 10,800 strikes followed by 10,700 while Call writing was seen at 10,800 and 10,900 strikes.

“Options data suggests an immediate trading range between 10,650 to 10,888 zones. The Nifty index opened gap-down and remained highly volatile throughout the session. It formed a Long Legged Doji followed by a Shooting Star Candle on a daily scale which indicates that bears are quite active at higher levels,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It failed the formation of higher lows of last seven sessions and corrected towards 10,700 zones. Now it has to cross and hold above 10,785 to extend its move towards 10,888 while a hold below 10,725 could drag it towards 10,680 then 10,625 levels,” he said.
First Published on May 16, 2018 04:33 pm
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