Technical View: Nifty forms a strong bull candle; can go long with a stop below 10033

The wait for a pullback rally is finally over as bulls remained in control of D-Street throughout the trading session on Thursday and made a strong bull candle which also resembles a bullish belt hold kind of pattern on the daily candlestick charts.

A bullish belt hold pattern is formed when the opening price becomes the lowest point of the day and is significantly lower than the closing price.

The index witnesses buying momentum throughout the trading sessions which results in a long white candlestick with a short upper shadow. A bullish belt hold often signals a reversal in investor sentiment.

The index which opened with a gap on the higher side rose to an intraday high of 10,182. It slipped marginally to 10,061 in morning trade but bulls pulled the index 10,150 levels. The index rose 122 points to close at 10,166.

Formation of a bullish candle after 7 consecutive days of the bearish candle would have come as a pleasant surprise for the bulls. Technically, if we look the previous corrections of August and September, the correction did not last for more than eight sessions.

The index did witness a breakout after a falling from 10400 recorded on November 28 to 10034 levels in the previous trading session but the market might not be out of the woods. But, the index was already in oversold position and a technical bounce was on cards, suggest experts.

Traders can ride the rally as long as Nifty holds above 10,000-10030 levels on closing basis with a stop below 10,033 levels. Following the breakout, the index moved above its crucial resistance level placed at 100-DMA, and 5-DEMA.

“The Nifty50 moved in line with our expectations as it registered a robust bull candle with a gain of more than 100 points suggesting that the index has kicked in next leg of upmove. However, it will be too early to conclude that correction has ended at a recent low of 10033 unless Nifty50 get past 10410 levels in next 6 trading sessions,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“In that scenario, we can easily conclude with a higher degree of confidence level that correction has ended and then Nifty50 is heading for new lifetime highs,” he said.

Mohammad further added that as of now, trade is clearly in favour of bulls and one can ride this rally for initial target placed in the zone of 10330 – 398 levels. Suggested stop for this trade should be placed below 10033.

India VIX fell down by 5.42 percent at 14.27. The decline in VIX from higher levels has given relief to bulls and market recovered smartly from lower zones.

On the options front, maximum Put open interest stands at 10000 followed by 9800 strikes while maximum Call OI is at 10500 followed by 10400 strikes.

“We have seen Call unwinding in 10100 to 10300 strike while fresh Put writing is seen at 10000 and 10100 strikes. The Nifty index negated its formation of lower highs – lower lows of last six trading session by surpassing its previous day’s high of 10104 and headed towards 10180 zones,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It closed the day with the decent gains of 122 points and formed a Bullish Belt Hold candle on the daily chart. Now if it sustains 10118-10094 then bounce back could extend to 10250-10300 zones while on the downside major support is seen at 10050 zones,” he said.