Technical View: Nifty forms bearish candle; 9965-10000 holds key for bulls

The Nifty50 lost momentum after hitting a record high of 10,114.85 on the F&O expiry day on Thursday and closed flat with a slight negative bias making a bearish candle which also resembles a pattern similar to ‘Shooting Star’ on the daily candlestick charts.

A bearish candle is formed when the index closes below the opening level. The Nifty50 index closed flat at 10,020.55 which was lower than the opening level of 10,063.25.

A bearish candle after a strong bullish candle is not a welcome sign for the bulls. But, as long as 9,965-10,000 on the index holds, bulls have nothing to worry, suggest experts.

The index opened with a gap on the higher side at 10,063.25 and rallied to a record high of 10,114.85. It slipped to 10,005.50 in the second half of the trading session before closing the day at 10,020.55.

The key takeaway from Thursday’s price action is that the bulls are still in charge and the intraday volatility could be largely due to July F&O expiry which was the best expiry in the last 16 months.

The Nifty index closed the series with the gains of 5.43 percent and closed higher by 200 points from its VWAP average. The index tested the upper band of the rising channel by connecting the highs of 9273 and 9709 on the daily chart.

“Bulls disappointed as Nifty50 witnessed a sell off from day’s high of 10,115 suggesting that market participants are greeting this new high with skepticism,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“However, if this fall is due to expiry compulsions and the market doesn’t witness follow through selling in next trading session then things should stabilise and favour bulls,” he said.

Mohammad further added that in such a scenario we can look for targets of 10,350 levels but if the index for any reason closes below 9,965 levels then traders should maintain a neutral stance on market and should prepare for sharp cuts.

On the August option front, maximum Put OI was seen at strike prices 9,800 followed by 10,000 while maximum Call OI was seen at strike prices 10,000 followed by 10,100.

However, options data scattered at different strikes being the beginning of current series but shift in higher put writing suggests the shift in support zones, suggest experts.

“On provisional basis, Nifty future has seen rollover of around 63% from July to August series. Long built were seen in selective Private Bank while shorts were mainly seen in IT stocks,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“The Nifty50 index lost all its gain in the second half of the session and closed on a flattish note at 10020. It formed a “Shooting Star candle” on the Daily chart as bears kept the force at higher levels and taken it back to previous day’s closing levels,” he said.

Taparia further added that the index has to continue to hold above 9,980 zone to witness an up move towards 10,100 while on the downside supports are seen at 9,950 and 9,928 mark.