Technical View: Nifty forms bull candle on weekly charts; remain long with a stop below 10,800

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The Nifty50 recouped losses and closed above its crucial resistance level of 10,900 on Friday attracting buying at lower levels for the second day in a row which is a positive sign for the bulls.

The index formed a ‘Small Bearish’ candle on intraday basis on daily charts as the closing level was lower than the opening level while on the weekly charts, the index formed a bullish candle for the second consecutive week in a row.

The index bounced back after hitting its 5-days exponential moving average (EMA) to close above 10,900 levels.

Consistent buying at lower levels suggest that the bulls are here to stay and investors who went long can continue with their positions as long as Nifty holds 10800, suggest experts.

The Nifty50 which opened at 10,914 rose to an intraday high of 10,928 but then bears pushed the index lower towards 10850 levels. The Nifty hit an intraday low of 10852 before closing the day at 10,906, up 1.75 points. On weekly basis, Nifty rose by about 1 percent.

“The Nifty50 continued its consolidation phase into the third session as intraday day dip is once again bought into by the market participants which resulted in a small bearish candle on an intraday basis with a slightly longer lower shadow as the day’s move was confined to the range of 76 points. However, on weekly charts a decent bull candle is visible,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

‘Albeit, at this juncture, technical oscillators are looking mixed weight of technical evidence appears to be tilting in favour of bulls with daily MACD generating buy signal in last Wednesday’s session apart from weekly Stochastics too generating a fresh buy signal,” he said.

Mohammad further added that traders can retain their positive stance as long as Nifty50 sustains above 10800 levels on a closing basis and look for a directional move to emerge on a close above 10980 levels.

Bank Nifty traded in previous day range for the most part of the trading session and formed an Inside Bar on a daily scale on Friday while a Doji Candle on the weekly scale.

India VIX moved up by 2.32 percent at 16.61 levels. Going forward, the volatility has to cool down further to get a decisive range breakout, suggest experts.

On the options front, maximum Put OI is placed at 10700 followed by 10500 strikes while maximum Call OI is at 11000 followed by 10900 strikes.

Marginal Put writing is seen at 10900 strikes while Call unwinding was seen at all the immediate strike price. Option band signifies a higher shift in a trading range in between 10750 to 11000 zones.

“The Nifty index failed to cross above previous day’s high of 10931 and drifted towards 10852 levels. However, it recovered from lower zones but finally closed on a flattish note by forming a Doji candle on the daily scale while Hammer Candle on the weekly scale which indicates that dips are being bought into the market,” Chandan Taparia, Associate Vice President, Analyst-Derivatives, Motilal Oswal Financial Services told Moneycontrol.

“Now, it has to continue to hold above 10820-10850 zones to witness an up move towards 10985-11000 zones while on the downside major support exists at 10777 zones,” he said.